Monday , May 23 2022
Home / FRED / Referring to the interest paid on reserves : A rate by any other name…

Referring to the interest paid on reserves : A rate by any other name…

Summary:
The Fed’s monetary policy tools are used to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy. These tools evolve over time as the economy evolves, and so it makes sense the terms that describe these tools also change. The FRED graph above shows three different interest rates the Board of Governors has set on the reserve balances commercial banks keep at their corresponding Federal Reserve Banks. The time frame is between October 9, 2008, and when this post was written: The interest rate on required reserves (the dashed red line) and the interest rate on excess reserves (the solid orange line) were identical. The former applied to balances kept in fulfillment of reserve requirement ratios, and the latter applied to balances kept in

Topics:
FRED Blog considers the following as important:

This could be interesting, too:

FRED Blog writes Gauging spending on gasoline and other energy goods

FRED Blog writes Where CPI inflation isn’t so high : Including a closer look at rents

FRED Blog writes Regional differences in mean and median family income : Growing inequality across and within regions

FRED Blog writes The new St. Louis Fed Macro Snapshot

The Fed’s monetary policy tools are used to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy. These tools evolve over time as the economy evolves, and so it makes sense the terms that describe these tools also change.

The FRED graph above shows three different interest rates the Board of Governors has set on the reserve balances commercial banks keep at their corresponding Federal Reserve Banks. The time frame is between October 9, 2008, and when this post was written:

  • The interest rate on required reserves (the dashed red line) and the interest rate on excess reserves (the solid orange line) were identical. The former applied to balances kept in fulfillment of reserve requirement ratios, and the latter applied to balances kept in excess of those requirements. On March 26, 2020, the reserve requirement ratios were lowered to zero, so the distinction in the type of reserves lost any practical significance. Both of these interest rate data series were discontinued on July 28, 2021.
  • As of July 29, 2021, the “interest rate on reserve balances” (the solid blue line) became the new name of the interest rate paid by the Federal Reserve on all reserve balances kept by commercial banks.

The FRED Team uses an automated process to name many of its data series. This process makes tracing the current data back to their sources easier. For information on series name changes, copyright statements, and much more, check the metadata in the notes below every FRED graph.

How this graph was created: Search for and select “Interest Rate on Excess Reserves (DISCONTINUED).” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Interest Rate on Required Reserves (DISCONTINUED).” Repeat the last step to add “Interest Rate on Reserve Balances” to the graph. To change the style and color of the lines in the graph use the “Format” panel.

Suggested by Diego Mendez-Carbajo.

About FRED Blog
FRED Blog
The Federal Reserve Bank of St. Louis is the center of the Eighth District of the Federal Reserve System. This District includes Arkansas, eastern Missouri, southern Illinois and Indiana, western Kentucky and Tennessee, and northern Mississippi.

Leave a Reply

Your email address will not be published. Required fields are marked *