American - Public | August 13, 1946 -
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.
Janet Yellen
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An increase in shareholder value can arise for reasons other than greater efficiency, such as increased power and the resulting ability to increase profits by raising prices.
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It is hard to have great confidence in predicting what market reactions to Fed decisions will be.
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When the time comes to raise rates, I do think there will be some benefits that flow through to savers.
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Policies to strengthen education and training, to encourage entrepreneurship and innovation, and to promote capital investment, both public and private, could all potentially be of great benefit in improving future living standards in our nation.
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As a general principle, the American people would be well served by the active pursuit of effective policies to support longer-run growth in productivity.
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Audit the Fed is a bill that would politicize monetary policy, would bring short-term political pressures to bear on the Fed. In terms of openness about our financial accounts, we are extensively audited.
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It's extremely important for our banks to have more capital, higher quality capital.
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Our objective in regulation should be to put in place tough enough regulation and capital and liquidity standards that we level the playing field and make it costly.
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It certainly would be helpful going forward for deficit reduction efforts to focus on the medium term while not subtracting from the impetus we need to keep a fragile economy moving forward.
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We need to keep in mind the well-established fact that the full effects of monetary policy are felt only after long lags. This means that policy makers cannot wait until they have achieved their objectives to begin adjusting policy.
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I would be uncomfortable raising the federal funds rate if readings on wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken, if market-based measures of inflation compensation were to fall appreciably further, or if survey-based measures were to begin to decline noticeably.
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