Policy Tools
Interest on Required Reserve Balances and Excess Balances
The Federal Reserve Banks pay interest on required reserve balances and on excess reserve 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 interest rate on required reserves (IORR rate) 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 on excess reserves (IOER rate) 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 (FOMC), 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 IOER rate. For the current setting of the IOER rate, see the most recent implementation note issued by the FOMC. This note provides the operational settings for the policy tools that support the FOMC’s target range for the federal funds rate.
The Board will continue to evaluate the appropriate settings of the interest rates on reserve balances in light of evolving market conditions and will make adjustments as needed.
The interest rates on reserve balances that are set forth in the table below are determined by the Board and officially announced in the most recent implementation note. The table is generally updated each business day at 4:30 p.m., Eastern Time, with the next business day's rates. This table will not be published on federal holidays.
DDP|
Interest Rates on Reserve Balances for January 27, 2021 Last Updated: January 26, 2021 at 4:30 p.m., Eastern Time |
Rates (percent) |
Effective Date |
|---|---|---|
| Rate on Required Reserves (IORR rate) | 0.10 | 3/16/2020 |
| Rate on Excess Reserves (IOER rate) | 0.10 | 3/16/2020 |
Related Press Releases
- Federal Reserve Board invites public comment on proposed amendments to Regulation D and issues final rule amending Regulation D with regard to reserve requirement ratios on transaction accounts (December 22, 2020)
- Federal Reserve Board announces approval of final rule amending Regulation D (June 18, 2015)
- Federal Reserve Board requests public comment on proposed technical changes to Regulation D (April 13, 2015)
- Federal Reserve issues technical note concerning the calculation of interest rates on required reserve balances and excess balances for the maintenance periods ending December 17, 2008 (December 16, 2008)
- Federal Reserve announces it will alter formulas used to determine interest rates paid to depository institutions on required reserve balances and excess reserve balances (November 5, 2008)
- Federal Reserve announces it will alter the formula used to determine the interest rate paid to depository institutions on excess balances (October 22, 2008)
- Board announces that it will begin to pay interest on depository institutions' required and excess reserve balances (October 6, 2008)