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Bernanke Says Interest on Reserves Would Be Main Tightening Tool

Federal Reserve Chairman Ben S. Bernanke said the Fed will raise the interest rate on excess reserves as its primary tool for tightening monetary policy rather than selling assets from its balance sheet.

“The principal tool that we contemplate is the interest rate paid on excess reserves,” Bernanke said today in response to audience questions at a conference in Stone Mountain, Georgia. During a tightening, money market rates will probably stay close to the interest rate on excess reserves, he said.