Additional Tools at the Zero Lower Bound - Interest on Reserves (IOR)
3 important questions on Additional Tools at the Zero Lower Bound - Interest on Reserves (IOR)
What does the Fed pay banks on the reserves they hold?
The Fed pays banks interest on their reserves held at the Fed.
What incentive does IOR provide to banks?
Even when rates are low, IOR encourages banks to hold reserves safely at the Fed.
How does IOR affect the Fed's influence?
IOR allows the Fed to directly influence lending behavior and control the money supply.
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