The beginning starts by paying interest on excess reserves, discouraging lending by banks.
Two points.
1. This will have some effect on reducing lending, but eventually will lag as banks realize they can earn more by lending.
2. The economy will not expand as quickly as it would if lending rebounded normally.
In summary, the stock market won't like this, and inflation will.
* * * * * J B K * * * * *
San Francisco
WASHINGTON (AP) -- Prepare for the end of record-low interest rates, Federal Reserve Chairman Ben Bernanke says. Just not yet.
Higher rates on credit cards, home equity loans and some mortgages will follow the Fed's eventual pullback of the trillions it injected into the economy. Savers will benefit, though. As rates gradually climb, certificates of deposit and savings accounts will finally pay more.
Bernanke indicated Wednesday that the Fed is still months away from raising rates or draining most of the stimulus money it injected to rescue the financial system.
