Interest on reserve balances
Interest on reserve balances is the rate the Federal Reserve pays banks on money they keep at the Fed. It sets a floor under the rates banks lend at.
🌍 In the real world
The Fed began paying it in October 2008. By raising or lowering it, the Fed steers the federal funds rate and other short-term rates.
A bank won't lend for less than it could earn safely at the Fed, so this rate shapes what savers and borrowers are offered.
🎮 In Journey Shares
The game's bank earns the Fed's published rate on reserve balances on its spare cash, updated daily. Savers get a little under it and margin borrowers pay more. →
🧭 How to use it
When the Fed raises this rate, game savings pay more the next day and margin loans cost more. The bank page shows today's rate and the date the Fed set it.
🎮 Learn Interest on reserve balances the fun way
Try it in a live 3D city with play money: trade shares in real public figures, get margin-called, pay your taxes and rob a bot or two. Free, and nothing real is at stake.
❓ Common questions
Why didn't the Fed pay interest on reserves before 2008?
It had no legal authority until a 2006 law, which was due to take effect in 2011. The 2008 crisis brought it forward to October 2008.
Is it the same as the federal funds rate?
No, but they're close: the Fed sets the reserve rate inside its target range to keep the federal funds rate there.
📜 Where it came from
🔗 Related terms
- Federal funds rate: The federal funds rate is the interest rate at which US banks lend reserves to each other overnight.
- Monetary policy: Monetary policy is how a central bank manages interest rates and the money supply to keep inflation low and employment high.
- Interest rate: An interest rate is the price of borrowing money, stated as a percentage of the loan per year.
- Risk-free rate: The risk-free rate is the return on an investment with no default risk, usually taken as the yield on short-term US Treasury bills.
Categories: Banking and credit
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