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News Link • Federal Reserve

A Serious Warning From the Federal Reserve about Interest Rates

• Economic Policy Journal
 The first clue to this was last week Thursday's report out of FT that the Fed may use mutual funds as a source to shrink Fed reserves by conducting reverse repurchase agreements with the the funds. When something like this is leaked by the Fed, they are trying to alert the markets so they won't be surprised by such a move when it occurs. As I wrote last week, I saw one reason for this move as the Fed:
...contemplating doing this, if banks start to lend against excess reserves, as a back up to Bernanke's plan to control money growth via the interest rate it pays on excess reserves.
Okay, so the Fed has a back up plan, but now there is an interesting story in WSJ's weekend edition headlined: Official Sees Aggressive Rate Boosts in the Offing. The story reports:

A senior Federal Reserve official said the central bank could push interest rates up more aggressively than usual when it decides to shift away from its easy monetary policy.

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