Federal Reserve Bank Costing Savers Money

  Inflation and low returns on deposits have led bank customers to lose more than $100 billion in purchasing power in each of the last five years which provides consumers with information about bank rates, investing and personal finance. The Federal Reserve's low interest rate policies, designed to boost the economy, have cost savers about $758 billion since the end of the Great Recession, based on a study released recently. The study said that average money market rates have ranged from 0.08% to 0.1% over the last year, well below the 1.5% inflation rate. Our central bank is essentially taking billions of dollars a year from average Americans, who are still struggling to get by in a bombed-out economy, and it is giving it to the very banks that helped cause the 2008 financial crisis in the first place.

Fed officials have pointed to those savings, as well as the broader benefits of an improving economy, in justifying the low interest rates. Central bank policymakers are reducing another stimulus program, its monthly bond-buying effort, and have indicated they could start raising interest rates slowly next year if the economy continues to improve. If there’s any upside to the story, it’s that the Fed has decided to end the latest round of its monetary easing program and will likely no longer use artificial means to tamp down U.S. interest rates. But for bank savers, the damage is already done, and it’s not all just about interest rates. By adjusting the $9.43 trillion in U.S. bank deposits up for interest earnings and then down for inflation, the study calculated that savers lost $122.5 billion during that time. Added to losses over the prior four years, the Fed's low-interest-rate policies have cost savers $757.9 billion, the study said. Still, Gallup poll results released Monday found that Americans, by a 62%-to-34% margin, prefer saving money to spending it. The so-called saving-spending gap is much greater than it was before the Great Recession as Americans have tried to reduce their debt.

McWhinnie, Eric. "How Much Did the Federal Reserve Cost Savers?" Wall Street Cheat Sheet. N.p., 23 Apr. 2014. Web. 26 Apr. 2014.

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