Journal Article

Falling reserve balances and the federal funds rate


Abstract: The growth of \\"sweeps\\"--a banking practice in which depository institutions shift funds out of customer accounts subject to reserve requirements--has reduced the required balances held by banks in their accounts at the Federal Reserve. This development could lead to greater volatility in the federal funds rate as banks try to manage their accounts with very low balances. An analysis of the evidence suggests that the volatility of the funds rate is rising slightly, but not enough to disrupt the federal funds market or affect the implementation of monetary policy.

Keywords: Federal funds market (United States); Bank reserves;

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Provider: Federal Reserve Bank of New York

Part of Series: Current Issues in Economics and Finance

Publication Date: 1997

Volume: 3

Issue: May

Order Number: 5