Bernanke: Low Rates Will Help Banks

Ben Bernanke, the Federal Reserve chairman, says keeping interest rates low will spur loan demand and eventually help improve banks’ profitability in the long run, The Wall Street Journal reports.

The Fed has made a rare vow to keep key rates “exceptionally low” until late 2014.

But banks have expressed concern over the Fed’s low-interest-rate policy, saying that it is costing them profitability and that overly strict regulations on banks’ are preventing an increase in lending activity.

"The purpose of the Federal Reserve's policy of low interest rates is to speed the economic recovery, which will increase loan demand and opportunities for profitable lending, among many other benefits, and thus, ultimately, lead to higher net interest margins," Bernanke said at a community banking conference in Arlington, Va., on Thursday.

Source: “Bernanke: Fed's Low Rates Should Help Bank Profitability In Long Run,” The Wall Street Journal (Feb. 16, 2012)