US Fed Losing Control Over Banks Amid Abundance of Money Liquidity
SputnikNews.com
28.10.2015
Several years of the ultra-accommodative Fed policies and the recent series of protractions with the long-overdue hike in borrowing costs allowed the US banks to accumulate multi-trillion reserves as a safety net allowing them to boost the scope of speculative activity once the Fed raises rates.
Kristian Rouz — Within a few hours, the US Federal Reserve will announce the results of their October policy meeting, with most market participants expecting the US borrowing costs to be left unchanged at their current ultra-low 0-0.25% level.
Market pressure against the possible hike is rife, and the abundance of money liquidity and high profitability of speculative financial transactions are affecting the Fed’s control over the broader situation.
While low interest rates are seen as supporting economic growth nationwide, most monetary assets concentrate on Wall Street, including the excessive investment capital inflowing from overseas.
In turn, America’s largest financials, whose overseas were recently hit by the dollar’s strength, are attempting to make up for their losses capitalizing on the yet ultra-accommodative Fed policy. As the situation persists, it is getting increasingly harder for the Fed to liftoff rates.
By late October the Fed’s effective interest rate determining the borrowing costs in overnight interbank transactions has dropped to its lowest possible at about 0.05% to null. The current ceiling is 0.25%, and while the Fed is preparing the first hike in rates since 2006, their plans meet stiff opposition by the market’s rife demand for cheaper dollar liquidity.
The Rest…HERE
