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Board of Governors of the Federal Reserve System
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Federal Reserve Board of Governors

Interest on Required Balances and Excess Balances

The Federal Reserve Banks pay interest on balances maintained to satisfy reserve balance requirements and on excess balances. The Board of Governors has prescribed rules governing the payment of interest by Federal Reserve Banks in Regulation D (Reserve Requirements of Depository Institutions, 12 CFR Part 204).

The Financial Services Regulatory Relief Act of 2006 authorized the Federal Reserve Banks to pay interest on balances held by or on behalf of depository institutions at Reserve Banks, subject to regulations of the Board of Governors, effective October 1, 2011. The effective date of this authority was advanced to October 1, 2008 by the Emergency Economic Stabilization Act of 2008. The text of both Acts is available on the Library of Congress' THOMAS Legislative Information website.

The interest rate paid on balances maintained to satisfy reserve balance requirements is determined by the Board and is intended to eliminate effectively the implicit tax that reserve requirements used to impose on depository institutions. The interest rate paid on excess balances is also determined by the Board and gives the Federal Reserve an additional tool for the conduct of monetary policy. According to the Policy Normalization Principles and Plans adopted by the Federal Open Market Committee on September 17, 2014, during monetary policy normalization the Federal Reserve intends to move the federal funds rate into the target range set by the FOMC primarily by adjusting the interest rate it pays on excess reserve balances.

The Board will continue to evaluate the appropriate settings of the rates paid on balances in light of evolving market conditions and make adjustments as needed.

The interest rates paid on balances maintained to satisfy reserve balance requirements and excess balances are published on the H.3 statistical release, "Aggregate Reserves of Depository Institutions and the Monetary Base" each Thursday at 4:30 p.m.


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Last update: April 22, 2015