Question

The Federal Reserve ________ pay interest on reserves held on deposit. The European System of Central Banks ________ pay interest on reserves held on

Answer 1

The Federal Reserve does not pay interest on reserves held on deposit. The European System of Central Banks does pay interest on reserves held on deposit.

Federal Reserve Board

• In the past, reserve banks were unable to offer interest on deposits. The Emergency Economic Stabilization Act of 2008 brought about a shift in that.
• The Federal Reserve Board had to increase the size of its balance sheet by purchasing Treasuries and mortgage-backed securities in order to increase the amount of liquidity available to the banking sector.

European System of Central Banks

• The major objective is to preserve price stability or the euro's worth. Price stability is the most significant contribution monetary policy can make in this area because it is crucial for economic growth and job creation, two goals of the European Union.
• The ECB has four decision-making bodies with the authority to carry out the institution's goals.

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