Interest on Required Reserve Balances and Excess Balances

Interest on reserve balances (IORB) rate will replace interest on required reserves (IORR) rate and interest on excess reserves (IOER) rate

The Federal Reserve Board announced the approval of a final rule amending Regulation D to eliminate references to an interest on required reserves (IORR) rate and to an interest on excess reserves (IOER) rate and replace them with a reference to a single interest on reserve balances (IORB) rate. The final rule also simplifies the formula used to calculate the amount of interest to be paid on such balances and makes other minor conforming amendments. The final rule takes effect on Thursday, July 29, 2021. For more information on these amendments, see the press release and FAQs posted on June 2, 2021.

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.

Implementation Note

Interest Rates on Reserve Balances for June 24, 2021
Last Updated: June 23, 2021 at 4:30 p.m., Eastern Time
Rates
(percent)
Effective
Date
Rate on Required Reserves (IORR rate) 0.15 6/17/2021
Rate on Excess Reserves (IOER rate) 0.15 6/17/2021

Related Press Releases

Back to Top
Last Update: June 23, 2021