3 ms·

As I mentioned in a sibling comment, there hasn't been a reserve requirement for two years. I'm not sure what's primarily driving the interbank borrowing now.

• sbelskie 5y ago
  But doesn’t the Fed still pay on reserves held? Even if it’s not required, the Fed increasing the rate paid on reserves would put upward pressure on other rates, otherwise banks would just take the IORB rate.
• bogomipz 5y ago
  The Fed Funds rate is still the reference for policy but the Fed has been using a new framework called "ample reserves" since the latter part of 2020. See: "How Does the Fed Influence Interest Rates Using Its New Tools?" https://www.stlouisfed.org/open-vault/2020/august/how-does-fed-influence-interest-rates-using-new-tools https://www.stlouisfed.org/open-vault/2020/august/how-does-f...
  • nickles 5y ago
    > the Fed has been using a new framework called "ample reserves" since the latter part of 2020 It’s been using an ample reserve regime for much longer than that. The Fed received congressional approval to implement a floor system around 2007 (it had been seeking it since the 80’s, I think), and has used it since the GFC. Are you possibly referring to the average inflation targeting framework?
    • bogomipz 5y ago
      Indeed I meant 2007, 2020 was the year the reserve requirements were adjust to a zero ratio which I was responding to in the earlier post.