A Quote by Janet Yellen
Paying interest on reserve balances enables the Fed to break the strong link between the quantity of reserves and the level of the federal funds rate and, in turn, allows the Federal Reserve to control short-term interest rates when reserves are plentiful.
Related Quotes
A higher IOER rate encourages banks to raise the interest rates they charge, putting upward pressure on market interest rates regardless of the level of reserves in the banking sector. While adjusting the IOER rate is an effective way to move market interest rates when reserves are plentiful, federal funds have generally traded below this rate.
Bad as "independence" is, the main fault of the Federal Reserve System - an admirable system if conducted in the public interest - is that too much power and control rests in the hands of people whose private interests are directly affected by the Federal Reserves' actions.
The central banks cannot control interest rates. That's a mistake. They can control a particular rate, such as the Federal Funds rate, if they want to, but they can't control interest rates.
...the Federal Reserve has the capacity to operate in domestic money markets to maintain interest rates at a level consistent with our economic goals
What central banks can control is a base and one way they can control the base is via manipulating a particular interest rate, such as a Federal Funds rate, the overnight rate at which banks lend to one another. But they use that control to control what happens to the quantity of money. There is no disagreement.
The Federal Reserve System is not Federal; it has no reserves; and it is not a system at all, but rather, a criminal syndicate.
We own? the Federal Reserve. There is this misconception that the Federal Reserve is some private entity. But if I might give an analogy here, we - U.S. taxpayers - own all the stock in the Federal Reserve.
Achieving price stability is not only important in itself, it is also central to attaining the Federal Reserve's other mandate objectives of maximum sustainable employment and moderate long-term interest rates.
In 2001, when the economy was strong, the country was able to absorb substantial deficit spending in the wake of September 11 without constricting the Federal Reserve's flexibility to ease interest rates.
The greatest economic power might in fact remain in the hands of the Federal Reserve. Economists credit the Fed's policy of keeping interest rates at historic lows with helping to pump up the economy and bring unemployment down.
When it appears as though the governors of the Federal Reserve believe that the end of the rate increases is near, that's very good news for investors. A lack of ambiguity from the Federal Reserve is always a little bit of a shocker.
Before passage of this [Federal Reserve] Act, the New York Bankers could only dominate the reserves of New York. Now, we are able to dominate the bank reserves of the entire country.
We believe that the Federal Reserve has to carry on with a progressive increase in interest rates as a consequence of the American economy.
I don't think it's possible for the Fed to end its easy-money policies in a trouble-free manner. Recent episodes in which Fed officials hinted at a shift toward higher interest rates have unleashed significant volatility in markets, so there is no reason to suspect that the actual process of boosting rates would be any different. I think that real pressure is going to occur not by the initiation by the Federal Reserve, but by the markets themselves.
There have been times when the Federal Reserve has restricted the money supply and raised interest rates to gain an end, which had much better been left to another Government agency or the Congress to attain. The country could have had lower interest rates without sacrificing anything else.
Stronger productivity growth would tend to raise the average level of interest rates and, therefore, would provide the Federal Reserve with greater scope to ease monetary policy in the event of a recession.
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