Interest on Reserve Balances (IORB)
Interest on reserve balances (IORB) is a type of interest paid by the Federal Reserve to depository institutions on the funds they hold in their reserve accounts. This interest rate is set by the Federal Open Market Committee (FOMC) and is used to influence the money supply and the economy. The interest rate is also used to help the Federal Reserve meet its goals of maximum employment, stable prices, and moderate long-term interest rates.
History of Interest on Reserve Balances
Interest on reserve balances was first introduced in 2008 as part of the Federal Reserve’s response to the financial crisis. The Federal Reserve began paying interest on excess reserves held by depository institutions in order to encourage them to keep more funds in their reserve accounts. This allowed the Federal Reserve to better control the money supply and the economy. The interest rate paid on reserve balances has been adjusted several times since then, and is currently set at 0.10%.
Comparison of Interest Rates
| Interest Rate | Federal Funds Rate | Interest on Reserve Balances |
|---|---|---|
| 0.25% | 0.25% | 0.10% |
Summary
Interest on reserve balances (IORB) is a type of interest paid by the Federal Reserve to depository institutions on the funds they hold in their reserve accounts. This interest rate is set by the Federal Open Market Committee (FOMC) and is used to influence the money supply and the economy. The interest rate is currently set at 0.10%, which is lower than the Federal Funds Rate of 0.25%. For more information about this term, you can visit the Federal Reserve website or other financial websites.
See Also
- Federal Funds Rate
- Federal Open Market Committee (FOMC)
- Money Supply
- Monetary Policy
- Interest Rate
- Depository Institutions
- Reserve Accounts
- Excess Reserves
- Financial Crisis
- Economy
