Fed raising rate paid on depository institution reserve balances to 1.95%

Federal Reserve Banks will pay 1.95% on depository institutions’ balances maintained to satisfy reserve balance requirements under Regulation D as well as excess balances they maintain, according to a Federal Reserve Board notice scheduled to publish Wednesday in the Federal Register.

This rate is up 0.20% from prior levels; the change is being effected through a revision in the Fed’s Reg D that will take effect upon publication in the F.R. “The amendments are intended to enhance the role of such rates of interest in moving the Federal funds rate into the target range established by the Federal Open Market Committee [FOMC],” the notice says.

On June 13, the FOMC increased the federal funds rate target range from 1.5% – 1.75% to a target range of 1.75% – 2%, effective June 14.

Regulation D, Final Rule