Federal Reserve Board Member Milan: The Fed cannot cancel the interest on reserves payments at this time.

Golden Finance reports that Federal Reserve Board Governor Stephen M. Miller stated that considering stopping the Fed from paying interest on reserves to commercial lending institutions is unrealistic. “I believe that under the current monetary policy implementation framework and banking regulation system, we are somewhat compelled to require banks to hold reserves, and you can’t really eliminate the interest on reserve balances,” Miller said. Some Republican lawmakers, including Florida Senator Rick Scott, support legislation to stop the Fed from paying interest on reserves. Miller stated, “If you want to consider reducing” the expenses on reserve balances, that is “a downstream part of the banking regulation framework.” He added, “We must first consider how to improve the banking regulation framework so that the size of the Fed’s balance sheet can be reduced.” He said, “Addressing the interest rate on reserve balances before solving regulatory system issues is completely backwards.” He also mentioned that lowering interest expenses “is definitely something we are repeatedly considering and discussing.”