Great questions - it's not that the Fed needs to borrow money. Rather, both of these elements are part of the Fed's toolkit to try to control interest rates. By paying interest to banks and money market funds, it puts a floor on private sector interest rates at that level. If you can lend to the Fed for 4.3% or 4.4%, you won't lend to anyone else for less than that.
Great questions - it's not that the Fed needs to borrow money. Rather, both of these elements are part of the Fed's toolkit to try to control interest rates. By paying interest to banks and money market funds, it puts a floor on private sector interest rates at that level. If you can lend to the Fed for 4.3% or 4.4%, you won't lend to anyone else for less than that.
Great questions - it's not that the Fed needs to borrow money. Rather, both of these elements are part of the Fed's toolkit to try to control interest rates. By paying interest to banks and money market funds, it puts a floor on private sector interest rates at that level. If you can lend to the Fed for 4.3% or 4.4%, you won't lend to anyone else for less than that.
Thanks for reading!