The Federal Reserve decided that the best way to stop deflation or inflation during a recession is to help keep rates of interest near zero. A meeting occurred with 12 regional Federal Reserve Bank directors. In this meeting, emergency personal loan discounted fees were discussed. The low rate of interest being given to banks on loans is the same thing the Federal Reserve are charging as a discounted cost. Rates being raised was suggested by two Federal Reserve branches that think the recovery is too slow for it.
Federal Reserve is keeping rates low
The Federal Reserve has a policy right now that could be kept. That means all rates, including bank loans, will stay really low. The strained banking and finance industry can be just fine with this. It is supposed for making sure that anyone needing to borrow cash could have access to liquid capital to help them. However, signs of recovery are beginning to show, although there is every indication that growth within the economy is going to be more modest than hoped, but that a return to more normal conditions is apparently under way.
Two Fed banks want higher rates
As outlined by Bloomberg, directors of two of the 12 regional Federal Reserve banks hope an increase in rates can apply. Of course the increase would be less than 1 percentage point and would only apply to emergency loans. They think it is better to raise the rates now when the recovery is starting to happen than waiting for too long for it to get better. Rates of interest for fast money loans from the Fed are really low. They are at about .75 percent. Not only that, but fewer banks are really borrowing these days.
This is not taking place anytime soon
The raise was really small and only asked for by Kansas City and Dallas Federal Reserve Banks. It also was not adopted. Bank rates will probably hold low for some time.
Further reading
Bloomberg
bloomberg.com/news/2010-09-07/fed-directors-last-month-saw-only-modest-near-term-expansion.html
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