Lowering the interest rate paid on reserves to zero would probably not cause banks to lend out their excess reserves, because banks are holding those reserves for other reasons (worries about capital ratios and the loans they could make), so the 25-basis-point rate is unlikely to make a large difference to lending.

causalpending

Speaker

John Taylor

Evidence Quote

I'd like to see it at zero but I just have to say I don't think that's would would make the banks lend out all those reserves maybe we should just set it to zero and see

Source

John Taylor on the State of the Economy 07/19/2010EconTalk
Created: 6/15/2026, 9:17:28 AM

My Notes

Loading notes...