David Beckworth has a new podcast, interviewing George Selgin on the subject of interest on reserves. I found the final part of the interview to be particularly interesting. Beginning about the 42:30 mark, they discuss the legal issues surrounding the payment of interest on reserves. During 2006 and 2008, Congress gave the Fed the right to pay interest on reserves, at a rate not to exceed the prevailing level of short-term interest rates. The actual interest rate paid by the Fed does exceed most measures of short-term interest rates; for instance, it has often exceeded the fed funds rate, or the rate on 3-month T-bills. But George points out that the Fed cleverly crafted the language so that in
Scott Sumner considers the following as important: Monetary Policy
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