Reply To: Negative Interest Rates


1) Can private banks just *not* put their money (beyond required reserves and whatever healthy margin they need) at the central bank, and thus avoid paying the 0.1% fee while simultaneously not using the money to extend loans?

2) If the Federal Reserve is targeting 0.25%-0.50% for the federal funds rate, why would any banks extend overnight loans for less than 0.50% if the Federal Reserve is paying 0.50% on excess reserves? (According to this the most recent daily rate averaged 0.38%.) Why are banks extending loans at 0.38% when they can keep the funds parked at the Fed for 0.50%?

Thank you.