Fed raises rates from 0 percent to .25 percent

[Dereich]

saving money doesn't help the economy, investing does. Why should the Fed care about "rewarding" savers - it's not like inflation is high, so the money in the bank isn't declining in value.

Well, the average savings account interest rate is 0.06% and I'm 99% sure that doesn't account for inflation so your money in the bank actually IS declining in value. And its not like saved money just sits there; more savings makes it safer for banks to loan and can be counted as investment that way.

I'm not sure where I feel the right level is, but one thing the Fed considers is the personal savings rate and household debt ratio and while we're not anywhere near 2008 levels I've heard it argued that Americans are still too close to the point where one bad quarter can cause a chain reaction of defaults and foreclosures. It's not like there's no good case out there for encouraging more saving, especially if you think the economy is doing better and that further artificial pushing by the Fed will cause more harm than good.

[Dereich]

More savings = more loans is old fashioned banking. Modern banks only care about the capital requirements they have to meet. It doesn't matter how much people are saving

That's true in theory, but banks still aren't lending to the extent that would otherwise be expected. My theory is that a larger margin of money to work with could improve that; no point in being so difficult on businesses wanting loans if you've got so much more cash to play around with anyway.

If you really wanted more saving, better solution would be to make high-yield CDs tax deductible, so people have more incentive to store their money and banks have more incentive to chase after savers with good rate offers.

That would be an issue for Congress though. Even if Fed board members did want to encourage spending, the politicians probably would not. They'd have to work with the resources they have.