Study: Fed Policy Has Cost Americans $749 Billion in Purchasing Power

New research finds that the Federal Reserve's six-year effort to keep interest rates at historic lows has come with an estimated price tag to depositors of nearly three-quarters of a trillion dollars.

FOSTER CITY, Calif., April 27, 2015 (GLOBE NEWSWIRE) -- Federal Reserve policy has cost the nation's bank depositors $749 billion in purchasing power over the last six years. That's according to a study by personal finance website that estimates how historically low interest rates have impacted the value of the nation's deposits.

The study calculates the amount U.S. depositors have effectively lost because rates on short-term deposits have failed to keep pace with inflation. Historically, short-term interest rates have usually stood near or above the rate of inflation, but the Federal Reserve's extraordinary measures to keep rates low in the wake of the Great Recession – notably its aggressively low federal funds rate – have changed that relationship significantly.

"Historically, savers have been able to count on earning a little more than inflation on their CDs, savings accounts and money market accounts," explains Richard Barrington, CFA, senior financial analyst for and author of the study. "The Fed's extreme low interest rates have turned that upside down. Savings have been losing rather than gaining value over the past six years."

Despite a mild reprieve for savers over the last 12 months – inflation actually trailed deposit rates during this period, which allowed the nation's depositors to regain roughly $8.4 billion in purchasing power – the six-year loss fell by only 1.1 percent to $749,443,213,010.

There has been widespread speculation that the Fed could raise the federal funds rate, which has stood at a target of 0 to 0.25 percent for more than six years, sometime in 2015. Still, based on the Fed's apparent concern that a dramatic lift to the federal funds rate could shock the economy back into decline, short-term bank rates appear unlikely to approach historical norms anytime this year.

Barrington says that one of the more frustrating aspects of recent Fed policy is that it has not produced the robust economic recovery for which many have hoped.

"Roughly six years into the recovery, the economy still hasn't been able to sustain any momentum, so you can't really say that the Fed's policy has been a roaring success," says Barrington. "In fact, it would be fair to ask if the economy would be better off with those three-quarters of a trillion dollars in the pockets of people who would be in a position to spend it. Think about it – a three-quarters of a trillion dollar stimulus package that wouldn't have cost the government a dime."

For more details on the study, please see the full feature on

Methodology calculated the estimated loss in purchasing power caused by Fed policy by taking the total amount on deposit at U.S. banks each year, multiplying it by the average bank money market account interest rate and then adjusting the figure for inflation. The difference between that figure and the original amount on deposit represents the estimated loss.

About has been a leading source of information on bank rates, personal finance, savings accounts and investing since 1999. The site seeks to provide the highest rates on CDs, money market accounts and high-yield savings accounts. is owned and operated by QuinStreet, Inc. (Nasdaq:QNST), one of the largest Internet marketing and media companies in the world. QuinStreet is committed to providing consumers and businesses with the information they need to find, research and select the products, services and brands that best meet their needs. The company is a leader in visitor-friendly marketing practices. For more information, please visit


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