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전망·동향
Bank Reserves since the Start of Quantitative Tightening
FRB of St. Louis
2024.04.19
One important aspect of U.S. monetary policy implementation is to control a short-term interest rate known as the federal funds rate (FFR), keeping it within the target range set by the Federal Open Market Committee (FOMC). The FFR is the equilibrium interest rate in the federal funds market. The federal funds market allows financial institutions, primarily banks, to borrow or lend funds, usually in the form of bank reserves. Bank reserves (or simply reserves) are funds that are deposited by banks with the Federal Reserve. Lenders in the federal funds market are banks that have excess reserves while borrowers are financial institutions that require extra funds to meet their short-term liquidity needs or, historically, reserve requirements imposed by the Federal Reserve.
First, this blog post describes the framework through which interest rate policy is implemented. We then discuss the implications of recent changes in the demand for bank reserves and what this might mean for the aforementioned framework.