Retail banks have warned they might need to start charging customers and companies for deposits if the US Federal Reserve cuts interest it pays on bank reserves.

 

The message from the US banks comes as fears grow the  Fed could start tapering its $85 billion monthly bond purchases, the Financial Times reports. Less money injected could mean the US authorities will start using alternative tools to boost the economy, like cutting interest rates.

The US Fed took the drastic decision to cut interest rates to near-zero to help stabilize the economy after the 2008 financial collapse and the following recession. This allowed banks to pay less for the money they borrow.

For the last five years, the benchmark overnight lending rate between banks has been in the range of zero to 0.25 percent.