Bank Directors Seminar, Coeur d'Alene, ID

None of the QE periods resulted in lower interest rates, but each did drive up stock prices

Why is inflation so “low” with QE in place? – The Fed starting paying interest on deposits that banks hold at Federal Reserve Banks at the end of 2008. – As a result, money growth did not greatly accelerated as markedly at the Fed’s balance sheet, as the bank reserves are being held in excess, on deposit at Fed banks, as we have seen. – Inflation should be a concern for bankers, because inflation directly impacts interest rates, unless the Fed is doing something strange. The more inflation, the higher are interest rates. – The Fed’s preferred measure, the core PCE deflator, ignores food and energy prices and adjusts for improved quality of goods and services. – Nonmonetary factors such as, technological advances in oil production and the expansion of reserves due to fracking have made the U.S. a net exporter of oil to some extent. – We should be dancing in the streets celebrating this advance.