Credit Tightening

 

News Alert

from The Wall Street Journal

Timing could be everything for Bernanke’s “exit strategy.”

Jim

From the WSJ.

U.S. Federal Reserve Chairman Ben Bernanke outlined how the central bank may tighten credit once the economic recovery has taken root.

In prepared testimony, Bernanke said the interest rate paid to banks on excess reserves held at the Fed may for a time replace the federal-funds rate as the main policy target. Raising the excess-reserves rate, which currently sits at 0.25%, would give banks an incentive to park more funds at the Fed instead of lending to companies or households. That could help restrain an overheating economy and reduce the risk of inflation.

http://online.wsj.com/article/SB10001424052748704140104575057160496102900.html