(Reuters) - A top Federal Reserve official said U.S. policymakers should wait and consider more economic data before making any big policy moves, and one step the central bank should consider is charging banks for holding their reserves.
“I’d like to see some more data before taking any really big action,” St. Louis Federal Reserve Bank President James Bullard told Bloomberg TV on Friday, adding the U.S. central bank could instead take smaller steps. He made the same point in an interview with Dow Jones.
One such step is lowering the interest rate on excess bank reserves, an idea that Fed officials have considered and that Bullard said he “is more sympathetic to” than he has been in the past.
“We’ve gone round and round on that issue but I think it might be time to try that out,” he told Bloomberg in the interview from the Kansas City Fed’s annual central banking symposium in Jackson Hole, Wyoming. “I’d even think about going into negative territory on that.”
Banks currently are paid a quarter of a percentage point, or 25 basis points, for keeping their money at the Fed. By lowering that rate and potentially pushing it into negative territory, banks could be encouraged to lend the money out.
“You could go to minus 25 or minus 50 (basis points),” Bullard told Dow Jones. “It would definitely change the calculus for banks.”
Bullard, who does not have a vote on the Fed’s policy-setting committee this year, also noted the Fed’s so-called forward guidance on the date until which it expects to keep overnight rates near zero - late 2014 - has not been adjusted since January.
“If you’re going to put forward guidance in the statement then you have to change that guidance when the situation changes,” he said in the Bloomberg interview.
Reporting by Jonathan Spicer and Tim Ahmann; Editing by Neil Stempleman