Washington - In testimony before the U.S. Congress on Tuesday, Fed Chief Janet Yellen reiterated the view of the Federal Reserve Board, that raising interest rates to the outrageous levels of the past, more than a fraction of one percent, would cause the U.S. economy to go into a tailspin.
Small savers who primarily keep their money in bank checking and saving accounts receive 0-.5% interest on their deposits.
The inflation rate, using the Federal Reserve's favorite measure, the Personal Consumption Expenditures (PCE) index, shows an inflation rate of about 2% over the last twelve months. The measure excludes food, energy, housing, investments, medical care, and anything else that consumers actually need, and is adjusted monthly to remove the effect of items that consumers can no longer afford.
"We realize we are in the eighth year of an expansion, but the economy remains on a shaky foundation. We therefore cannot allow lower and middle income consumers to receive a fair return on their deposits, they will need to wait until the trillions of dollars made by wealthy individuals in the stock market percolate down through the economy to the less fortunate. That will happen soon, we feel, maybe in a decade or two", said Yellen.
"Congress will soon consider trillions of dollars in tax cuts for corporations and wealthy individuals, further increasing the amount of money available to trickle down to consumers and small savers. Therefore rewarding selfish savers with a fair rate of return on their bank deposits is simply not needed", Yellen explained further.