Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive
150x172_CUEffect.jpg
Contacts
LISA MCCUEVICE PRESIDENT OF COMMUNICATIONS
EDITOR-IN-CHIEF
MICHELLE WILLITSManaging Editor
RON JOOSSASSISTANT EDITOR
ALEX MCVEIGHSTAFF NEWSWRITER
TOM SAKASHSTAFF NEWSWRITER

News Now

Washington
New Fed rate on excess reserve balances
WASHINGTON (10/24/08)—Effective yesterday, the Federal Reserve Board adopted a revised formula to determine the interest rate it will pay on credit unions' and other depository institutions' excess reserve balances. The Fed determined that a narrower spread between the target funds rate and the rate on excess balances would help encourage trading in the funds market at rates closer to the target rate. Therefore, the Fed issued a new formula that sets the rate on excess balances equal to the lowest Federal Open Market Committee (FOMC) target rate in effect during the reserve maintenance period less 35 basis points. Prior to the change, the rate had been set as the lowest federal funds rate target established by the FOMC in effect during the reserve maintenance period minus 75 basis points. The Fed announced just two weeks ago that it would begin to pay interest on depository institutions' required and excess reserve balances effective Oct. 9. The Financial Services Regulatory Relief Act of 2006 gave the Fed authority starting in 2011 to lower reserves to zero and/or to pay interest--not to exceed other short-term rates--on the reserve balances actually maintained. The new Emergency Economic Stabilization Act gave the Fed that authority starting now. The authority is being implemented through changes to the Fed's Regulation D. Reserve balances are balances held to satisfy depository institutions' reserve requirements and excess balances are those held in excess of required reserving balances and clearing balances.


RSS





print
News Now LiveWire
56% struggle with subprime credit scores says @cfed survey HT @washingtonpost http://t.co/RHmMvuhNtw
35 minutes ago
How to use social media for crisis communications Feb. 10 webinar from @SBAgov, @AgilityRecovery http://t.co/d16t8RHr7n
1 hour ago
#Consumersentiment highest in 11 years @Umich January survey http://t.co/64ORm6b0Fc
5 hours ago
#creditunions teach #college students how to handle the plastic http://t.co/SYy24PSQmn
5 hours ago
How you might change how you bank in 2015 @Bankrate http://t.co/wRhQsyTvul
6 hours ago