Paying interest on reserves should allow us to better control the federal funds rate, as banks are unlikely to lend overnight balances at a rate lower than they can receive from the Fed; thus, the payment of interest on reserves should set a floor for the funds rate over the day. With this step, our lending facilities may be more easily expanded as necessary.
So long as financial conditions warrant, we will continue to look for ways to reduce funding pressures in key markets. BIS Review 121/2008  3  Economic activity had shown signs of decelerating even before the recent upsurge in financial-market tensions.