The Fed has recently paid interest on the required and excess reserves that banks hold.

Question

Quizplus · Accepted Answer

The Federal Reserve has been paying interest on both required and excess reserves held by banks since October 2008, as a way to incentivize banks to keep their excess reserves with the Fed instead of lending them out in the market. This policy tool helps the Fed to control the federal funds rate, which is the interest rate that banks charge each other for overnight loans.

The Fed Has Recently Paid Interest on the Required and Excess