Banks do not base decisions on how much they should hold in reserve at the Federal Reserve Banks on their desire to earn the interest paid on excess reserves, according to a Fed survey of senior financial officers released today.
The benefits that TNB offers its institutional investor client base would be more than offset by the harm it does to the banking system and the Fed’s use of IOER.
The good news is that both borrowers and lenders continue to exercise discipline and consumers are still in very strong financial shape.
With the Fed’s turn to a more dovish stance, there may not be many more rate hikes in this cycle. As long as monetary policy does not turn restrictive, the opportunity remains to see just how much slack is left in the labor market.
Banks are not basing decisions on how much to hold in reserve at the Federal Reserve Banks on a desire to earn the interest paid on excess reserves, according to a Fed survey of senior financial officers released today.
