Fed increases interest rate paid on Reg D reserves

The rate of interest paid on depository institutions’ reserves with the Federal Reserve System rose by a 0.05 percentage point to 1.6% as of Jan. 30, according to a notice set to publish Wednesday in the Federal Register.

Reserve requirements are set under the Federal Reserve Board’s Regulation D, which also provides for payment of interest on balances maintained to satisfy reserve balance requirements (IORR) and on excess balances (IOER) maintained at Federal Reserve Banks. “The amendments are intended to enhance the role of such rates of interest in maintaining the Federal funds rate in the target range established by the Federal Open Market Committee,” the notice states.

The final rule is effective upon publication in the F.R. (that is, on Wednesday) but applicable as of Jan. 30, 2020.

Regulation D: Reserve Requirements of Depository Institutions