Journal Article

How Many Reserves Does the Federal Reserve Need to Supply?

Abstract: The level of reserves the Federal Reserve needs to supply depends on the spread between the federal funds rate and the IOR rate. If policymakers choose to operate with a near-zero federal funds-IOR spread, then reserve balances of $1.5 trillion may be required to implement monetary policy. However, if policymakers opt for a higher federal funds-IOR spread, then reserve balances of about $1.1 trillion may suffice.

Keywords: Interest rates; Federal funds rate; Reserve balances;

JEL Classification: E52; E43;

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Macro Bulletin

Publication Date: 2019-03-06

Pages: 1-3