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rdappa
Lv 4
rdappa asked in Social ScienceEconomics · 1 decade ago

Why doesn't the FED split the interest rate into Regional Interest Rates?

With the FED wanting to do more as far as economic solutions and stimulus, why don't they unnationalize the base interest rate and allow fluctuation within its 12 districts?

It would cause some issues but would benefit by allowing certain regions to contract as other continue to grow. The one issue that might needs be solved would be to realign the districts.

Your thoughts?

Update:

Faz- Arbitrage is a good point. I will give it some thought...

SDD- The base interest rate would not be removed, but added to with Regional Interest Rates. Perhaps national banks would still be affected by the base rate, but regional banks would be able to utilize either? The problem the FED is running into is that is can not macro manage microcosms within the whole. The attempt here is to allow fluctuation within the system without whole system bias. The advantage would be that each region would be able to function interdependent of each other, so as to cool and heat as natural market fluctuations already permit until stopped currently by one base interest rate.

4 Answers

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  • Faz
    Lv 7
    1 decade ago
    Favorite Answer

    Arbitrage would mean private lenders and borrowers would exploit interest rate differentials until they were all equal again.

  • Anonymous
    1 decade ago

    The FED with F means Federal, not State. There are only 12 FED branches throughout the country, not in every State. If every State has its own dollar, it might be necessary to have different fund rate. The FED does not determine the market rate which is different in each state.

    Source(s): Anjaree
  • SDD
    Lv 7
    1 decade ago

    So you're proposing to limit commerce between the Federal reserve Districts? How? Why?

  • Anonymous
    1 decade ago

    Arbitrage is the answer.

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