In 2006, the Congress had approved plans to allow the Fed, beginning in 2011, to pay interest on banks' reserve balances. In the fall of 2008, the Congress moved up the effective date of this authority to October 2008. — Janet Yellen Copy Share Image
Paying interest on reserve balances enables the Fed to break the strong link between the quantity of reserves and the level of the federal funds rate and, in turn, allows the Federal Reserve to control short-term interest rates when reserves… — Janet Yellen Copy Share Image
