Skip to main content
<<<<<<< HEAD <<<<<<< HEAD

Payment services modifications approved in support of Same Day ACH

The Board of Governors of the Federal Reserve System has approved modifications to the Federal Reserve Banks’ FedACH® Services, National Settlement Service and Fedwire® Funds Service to help facilitate adoption of a later Same Day Automated Clearing House (ACH) processing and settlement window.

Specifically, the Federal Reserve Banks will:

  • Add a new, later Same Day ACH processing window to FedACH Services, with a deadline of 4:45 p.m. ET for originating depository financial institutions (ODFIs) to transmit files to FedACH Services, a target deadline for distributing files to receiving depository financial institutions (RDFIs) of 5:30 p.m. ET and a target for settlement of items in those files at 6 p.m. ET
  • Extend the daily operating hours of the National Settlement Service to 6:30 p.m. ET from 5:30 p.m. ET
  • Extend the daily operating hours of the Fedwire Funds Service to 7 p.m. ET from 6:30 p.m. ET
  • Reduce the window between the close and reopening of the Fedwire Funds Service to 90 minutes from two hours
  • Increase the threshold for extending the closing of the Fedwire Funds Service to $3 billion of delayed funds transfers from $1 billion, with the expectation that the threshold could be increased further to maintain the consistent 9 p.m. ET reopening of the service. The Federal Reserve Banks will closely monitor delays to the reopening of the Fedwire Funds Service and will determine, in consultation with the Board, whether further increases to the threshold may be warranted.

These changes are in response to a rule change approved by Nacha’s voting members to create a third new processing window for Same Day ACH items. The Federal Reserve Banks will make these changes in alignment with, and in support of, Nacha’s effective date of March 19, 2021. We will provide additional information regarding the changes closer to implementation.

A third Same Day ACH processing window aligns with the Federal Reserve's ongoing objective to support improvements in the speed, security and efficiency of payment systems in the United States as well as public interest in the greater availability of payment services. More information will be available on the Same Day ACH Resource Center.


Federal Reserve Payments Study finds growth in card and ACH payments

The 2019 Federal Reserve Payments Study (Off-site), released in December 2019, found that growth in debit card, credit card and Automated Clearing House (ACH) payments continued to accelerate from 2015 to 2018, while check payments continued their long-run decline. The Federal Reserve Payments Study is a collaborative effort by the Federal Reserve Bank of Atlanta and the Board of Governors of the Federal Reserve System to track and document developments in the U.S. payment system through the collection of quantitative survey data. The 2019 Federal Reserve Payments Study is the seventh in a series of triennial studies conducted by the Federal Reserve System since 2001 to estimate aggregate trends in noncash payments in the United States.

Highlights of results

  • The number of core noncash payments, comprising debit card, credit card, ACH and check payments, reached 174.2 billion in 2018, an increase of 30.6 billion from 2015. The value of these payments totaled $97.04 trillion in 2018, an increase of $10.25 trillion from 2015.
Trends in noncash payments, by number, 2000-18 Trends in noncash payments, by value, 2000-18
  • Value and number growth rates for noncash payments exceeded those of the prior period, 2012–2015. The value increased by $10.25 trillion to $97.04 trillion. The number increased by 30.6 billion payments to 174.2 billion.
Noncash payments, 2015 and 2018
  • By number, most noncash payments were made by cards. By value, most were by ACH.
Shares of non-cash payments 2018
  • Total ACH payments, comprising both credit transfers and debit transfers, grew 6.0% per year by number and 7.2% per year by value from 2015 to 2018, faster by both measures than from 2012 to 2015.
Check payments and ACH debit transfers, 2000 and 2018
  • In 2018, for the first time, the number of ACH debit transfers (16.6 billion) exceeded the number of check payments (14.5 billion). In 2000, in contrast, the number of ACH debit transfers stood at 2.1 billion compared to 42.6 billion check payments.
  • In a return to the more accelerated decline observed from 2003 to 2012, the number of check payments fell 7.2% per year from 2015 to 2018. After increasing from 2012 to 2015, the value of check payments resumed its decline, decreasing 4.0% per year from 2015 to 2018.
Checks paid by billions
  • In-person, general-purpose card payments increasingly involved chip authentication. More than half (56.7%) used chip authentication in 2018 compared with 2.0% in 2015.
Chip authenticated
  • The number of ATM cash withdrawals was 5.1 billion in 2018, a slight decline of 0.1 billion from 2015. The average value of ATM cash withdrawals continued to rise, increasing to $156 in 2018 from $146 in 2015, accordant with the continued decrease in the total number and the continued rise in the total value of ATM cash withdrawals.
On-us and foreign ATM cash withdrawals, by number and value, 2003-18

What payments data is available now?

Data and reports from all years of the Federal Reserve Payments Study, from 2000 through 2019, are available on the Federal Reserve Payments Study (Off-Site) page on the Board of Governors’ website.

What else is the Fed doing to examine payments?

Complementary efforts are under way to examine fraud, fraud prevention and fraud mitigation. They include:

  • The Strategies for Improving the U.S. Payment System (Off-site) Secure Payments strategy, through which the Fed is leading collaborative efforts with the industry to examine and mitigate payments fraud
  • Surveys by the Federal Reserve Bank of Minneapolis to collect qualitative data about the ways that financial institutions and merchants combat fraud
  • Surveys by the Federal Reserve Bank of Atlanta that ask a nationally representative sample of consumers about their experience with payments fraud
  • Reports of fraud information by debit-card issuers under Reg II

Action Item:

For the full report, including charts and data tables, visit the Federal Reserve Payments Study (Off-Site) page on the Board of Governors’ website.


>>>>>>> c19a174... Test - Fed360 files =======

Concept Imagineering finds Check Adjustments webinars well worth the time

There is no better time to take a refresher course than when a new person joins your team. Concept Imagineering, LLC did just that by registering for a Check Adjustments webinar. A consulting company based in Honolulu, Hawaii, Concept Imagineering processes checks on behalf of its clients. The organization utilized a Check Adjustments webinar to assist with onboarding a new staff member and to learn best practices for processing check adjustments. Office Coordinator Kathryn Asato said, “We had someone come on board to assist with the Check 21 processing, so it was a good time for us to go through that step-by-step process.”

Check Adjustments webinars are led by Federal Reserve check adjustments expert Tracy Beauford, who focuses on explaining the fundamentals. The resources shared in the webinars can be applied immediately and be used for reference after the session ends.

We picked up a lot of little tips and details from the webinars. When we go to process our check adjustments, we are much more comfortable. Tracy also explained the overall banking process, which helped provide clarity. It is always good when you have someone to just explain it.
Kathryn Asato Office Coordinator
Concept Imagineering, LLC

Currently, the Federal Reserve Banks offer two Check Adjustments webinars. The Check Adjustments Insights into Investigation Types (ITYPs) webinar provides a basic understanding of the most common investigation types that institutions encounter in today's processing environment. At the Principles and Concepts of Image Cash Letters and Electronic Check Adjustments webinar, our expert will equip attendees with a fundamental understanding of:

  • How checks are cleared in an electronic file format
  • How subsequent errors occur
  • How to submit an electronic adjustment request and applicable documentation to resolve the error

Concept Imagineering attended the Check Adjustments Insights into Investigation Types (ITYPS) webinar, and Asato thought it was well worth the time for her team. “It is great to have that foundation from the Fed,” she said.

Get started today!

You too can experience the benefits of our fee-based Check Adjustments webinars. Register today for the Check Adjustments Insights into Investigation Types (ITYPS) (Off-site) webinar or the Principles and Concepts of Image Cash Letters and Electronic Check Adjustments (Off-site) webinar. Attendees can earn up to 3.3 Accredited ACH Professional (AAP) credits and/or up to 3.3 National Check Professional (NCP) credits.

Each webinar is offered for a per-connection fee of $300, payable by credit card. You can view event descriptions and register for a variety of other webinars on our Federal Reserve Bank Webinars page. Be sure to bookmark the page as a favorite for future reference.


The Federal Reserve Banks do not sponsor or endorse any of the non-Federal Reserve Bank-related products, parties or entities discussed in this publication.

>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
<<<<<<< HEAD
Collaboration in action: Federal Reserve joins the U.S. Faster Payments Council

Collaboration in action: Federal Reserve joins the U.S. Faster Payments Council

The Federal Reserve System announced in a press release on December 5, 2019, that it has joined the U.S. Faster Payments Council (FPC) (Off-site) as a founding sponsor. As a member, we’ll actively participate in the FPC’s work to facilitate faster payments in the United States, enabling Americans to securely pay anyone, anywhere, at any time with near-immediate funds availability. To learn more, read the full press release (Off-site).

We have an unprecedented opportunity to work together to design the faster payments ecosystem from the ground up. Ongoing collaboration is essential for addressing the opportunities and challenges ahead, encouraging faster payments adoption and further transforming the U.S. payment system.
Connie Theien Senior Vice President and Director, Payments Industry Relations
Federal Reserve Bank of Chicago

Theien will represent the Federal Reserve on the FPC and coordinate its participation in FPC work groups and other engagements. For more information, visit the FPC website (Off-site).

>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
<<<<<<< HEAD <<<<<<< HEAD

Busting myths about the FedACH® Exception Resolution Service

Does it take you forever just to resolve a simple Automated Clearing House (ACH) exception case? Are you wasting time by the phone or fax machine? Then the FedACH Exception Resolution Service can help you reclaim your time! We’re breaking down a few common misconceptions we hear from customers about why they think they cannot take advantage of the service.

  1. I cannot use the service because my files go through a correspondent.
    We hear this myth often, and the truth is that even if you do not process your own ACH payments, the service could still help you resolve cases that come from your processor. We capture all ACH activity that comes through the Federal Reserve – even when it comes from third parties – so you can initiate cases on any files that come through us.
  2. I need a FedLine Advantage® connection to initiate and respond to a case.
    False! If you have a FedLine Web® connection, you can still access the service. You only need a FedLine Advantage connection if your institution wishes to use FedACH file-processing services.
  3. I can only send exception cases to financial institutions that are currently set up on the “Full Service” option.
    To help ensure that this service has the broadest reach possible, as a one-time event, we automatically granted users with FedLine® FedACH Information Services access the ability to respond to cases initiated with their institution. That means many institutions that might only be set up on this “Partial Service” can still resolve cases with your institution.
  4. We only have exceptions every now and then, so the automated Exception Resolution Service isn’t worth it for me.
    The Exception Resolution Service is designed to give you flexibility and automation in resolving your exception cases. Even if you only handle a few exceptions, we still think you’ll find value in knowing that when you use the service, your information is being exchanged securely and to the authorized individual at the other institution. The service also provides access to two years of ACH transactions settled at the Federal Reserve Banks and a 13-month archive of all cases sent or received for your institution, which can be helpful when you’re investigating older cases.

Spring conference season is coming up

Now that 2020 is in full swing, it’s time to start getting ready for spring conference season! Each year, Fed representatives attend a wide variety of industry events across the country. These exciting events are great opportunities to learn more about Federal Reserve Bank Services, hear from interesting speakers, meet up with colleagues and make valuable connections. Fed representatives are always eager to speak with customers about our services, offerings and industry news. You can keep an eye out for them at industry events or plan in advance to meet up at conferences.

>>>>>>> c19a174... Test - Fed360 files

Action Item:

If we’ve busted any of these myths for you and you would like to learn more about how the Exception Resolution Service can help your institution, watch a quick video that explains solving exception cases (Off-site) or reach out to your account executive. Not sure who your account executive is? No problem! Complete our contact request form (Off-site) and we’ll put you in touch with them.

<<<<<<< HEAD
>>>>>>> c19a174... Test - Fed360 files =======

Federal Reserve Banks end support for Microsoft® Windows® 7

Microsoft has announced that it has ended support for Windows 7, effective January 14, 2020. In alignment with this change, the Federal Reserve Banks will no longer support Microsoft Windows 7 for use with the FedLine Web® and FedLine Advantage® Solutions. We strongly recommend the use of Microsoft Windows 10 and also continue to provide support for Windows 8.1.

End User Authorization Contacts (EUACs) are responsible for ensuring that your organization and its FedLine® Subscribers comply with minimum hardware and software requirements. Please review the full list of hardware and software requirements for FedLine Web and FedLine Advantage and work with your IT staff to ensure compliance. If you have questions, please contact the Customer Contact Center.


“Microsoft” and “Windows” are registered trademarks of Microsoft Corporation.

>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
<<<<<<< HEAD <<<<<<< HEAD
>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
>>>>>>> c19a174... Test - Fed360 files
<<<<<<< HEAD <<<<<<< HEAD

It’s here! The new Savings Bond Valuation and Verification Tool

In an effort to streamline the savings bond redemption process, we would like to introduce the latest tool in our toolbox for financial institutions. The U.S. Department of the Treasury’s Bureau of the Fiscal Service (Fiscal Service) has launched a simple and easy-to-use Savings Bond Valuation and Verification (SBVV) tool (Off-site). This tool enables paying agent institutions to quickly calculate a savings bond’s total value and verify a savings bond’s validity.

Your customer-facing staff will now be able to:

  • Automatically populate a bond’s serial number via a magnetic ink character recognition (MICR) check reader
  • Instantly view the value and interest of a bond
  • Accurately tally the sum of multiple bonds that are eligible to be cashed
  • Quickly identify invalid bonds that need further research

Watch the Boston Fed’s 2020 video to help ensure compliance with reserve requirements

If you are a customer in the First District, the Federal Reserve Bank of Boston is offering a refreshed, self-paced, 30-minute 2020 Reserve Account Management Session Video (Off-site) sponsored by the Supervision, Regulation and Credit Department.

The video is targeted to First District financial institution staff with direct responsibility for, or a general interest in, reserve requirement management and administration. This session would be informative for institutions with questions on reserves management or with a desire to stay apprised of developments relating to reserves programs.

For more information, contact the First District Reserve Account Management at (800) 526-0338.

>>>>>>> c19a174... Test - Fed360 files <<<<<<< HEAD

Throughout the 85-year evolution (Off-site) of the U.S. Savings Bonds Program, Fiscal Service has continually relied on feedback provided by paying agent institutions, such as yours. The easy-to-use SBVV tool now offers paying agents a great solution for cashing savings bonds.

>>>>>>> c19a174... Test - Fed360 files =======

Account Management Information and Daylight Overdraft Reports application changes

In response to your feedback, the Federal Reserve Banks have been updating the way we deliver information and services to our customers. As part of these ongoing efforts to improve your experience, in late second quarter 2020, we will update the look and feel of the Account Management Information (AMI) and the Daylight Overdraft Reports applications. These applications are accessed via the FedLine Web® and FedLine Advantages® Solutions.

Enhancements will result in a more modern and user-friendly interface that is consistent with industry standards. The changes will also include a new technical infrastructure that will help make the applications more secure and resilient, as well as provide the foundation for future features and capabilities.

What is changing?

  • The number of accounting statements available to users will increase from five to 14
  • The number of billing statements available to users will increase from three to six
  • The Find Non-Fedwire transactions feature is being enhanced and will allow the ability to search up to five business days of activity and also provide additional search and filtering options

What is not changing?

  • There will not be any changes to the Statement of Account, Statement of Service Charges, Collateral and Daylight Overdraft Reports
  • There will not be any changes to the Accounting Information (AIS) data files (IDAY, FIRD, SCRD, CMS Plus and SASF)

As a reminder, screen scraping is discouraged and currently not supported. If your institution is currently scraping data from AMI screens, we cannot guarantee or support this functionality in the new application.

What actions do I need to take?

There is no immediate action required. We will continue to communicate with your organization as we get closer to the implementation date. Although testing will not be required, we expect that you will be able to view the changes in the AMI Depository Institution Test (DIT) environment in second quarter 2020.

Where can I find more information?

Additional information regarding this initiative and future training dates will be communicated first quarter 2020.

We appreciate your support and look forward to continuing to provide you with efficient, high-quality services. If you have any questions regarding these changes, please contact National Accounting and Customer Support at

>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
<<<<<<< HEAD
>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
<<<<<<< HEAD <<<<<<< HEAD

Currency Education Program: U.S. Secret Service launches counterfeit prevention campaign

The United States Secret Service recently launched Operation “Quick Glance” (Off-site) to inform U.S. retailers and consumers how to identify easy-to-detect counterfeit currency. Operation “Quick Glance” focuses on motion picture, foreign writing and replica notes. The following recommendations were listed in the official press release:

  • Take a quick glance at currency when you receive it from any retail establishment or individual
  • Look for foreign writing on the front and back of the note
  • Look for the words "For Motion Picture Use Only" or the word "Replica" on the note
  • Contact your local Secret Service Field Office (Off-site) if you have information about counterfeit currency

For more information on Operation "Quick Glance," visit (Off-site). For more information on the security and design features of U.S. currency, and to locate your local Secret Service Field Office (Off-site), visit (Off-site).


The Ops Stop: Prepare for your first 2020 invoice

The Ops Stop provides your organization with a one-stop shop full of helpful operational resources offered by the Federal Reserve Banks. This month, we are featuring the Service Fees page, which provides detailed information on the pricing for Federal Reserve Financial Services.

In early February, your institution should receive your first invoice of 2020 for Federal Reserve Financial Services. As previously announced, our customers will see relatively stable pricing with modest increases for a few services. Pricing for the following services remains unchanged in 2020:

Services with pricing changes in 2020 are:

The impact of these changes on your institution will depend on your product mix and volume. Details on the specific changes and information you need to price your services or reconcile your bill can be found on the Service Fees page. This page includes links to both 2019 and 2020 fee schedules for all of our services.

If you have any questions about product and fee changes or how they may affect your institution, please contact your account executive. For questions related to your bill, please look up your Accounting Services contacts by entering your ABA in the “Find Your Contacts” field on the Contact page.

>>>>>>> c19a174... Test - Fed360 files =======

Cash order deadline changing to 12 p.m. local time

To better serve our FedCash® Services customers and to provide the same level of service for all customers across the Federal Reserve System, we will be permanently modifying our cash order deadline. This change will establish a national cash order deadline to better support financial institutions, armored carriers and Federal Reserve Cash Depot operators.

Effective April 27, the deadline for ordering currency and coin for all Federal Reserve Bank offices and cash depots will change to 12 p.m. local time.

We understand that, for some organizations, this adjustment may necessitate changes in your internal processes, and we appreciate your support and understanding as we work to maintain the efficiency of our cash-processing functions.

For questions related to this change, please contact your local Federal Reserve Cash Services department.

If you know of others in your organization that should be notified of these types of operational changes, please share this article and encourage them to subscribe to receive future FedCash Services announcements.

>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
<<<<<<< HEAD
>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
<<<<<<< HEAD <<<<<<< HEAD

Find out if the Fed can help you meet your customers’ seasonal credit needs

The Seasonal Credit Program (Off-site)provides a reliable source of funding to small depository institutions that lack access to national money markets and experience seasonal fluctuations in deposits and loans. Under the program, institutions may obtain funds through the Discount Window during periods of seasonal need, allowing them to carry fewer liquid assets in the off-season and to make more funds available to meet the credit needs of their local communities. A seasonal credit line may be approved for periods of up to nine months in a calendar year. Advances under the program are available daily, with partial and full prepayments allowed without penalty. There are no commitment fees, stock purchase requirements or other expenses involved in setting up and maintaining a seasonal line of credit, even if it is never used. The seasonal credit rate is a variable, market-based interest rate that may fluctuate. Please see the Federal Reserve Discount Window and Payment System Risk (Off-site) website for the most current seasonal credit rate.

Examples of seasonal credit needs

While an institution is expected to fund a portion of its seasonal funding needs from its own resources, the Seasonal Credit Program may be a good source of supplemental funding if an institution experiences regular fluctuations in deposits and loans due to seasonal types of businesses, such as:

  • Agriculture
  • Construction
  • Higher education
  • Municipal financing
  • Tourism

Does your institution qualify?

To qualify, your institution will need to:

  • Demonstrate that a need for funding persists for at least four consecutive weeks based on the institution’s loan and deposit activity over a three-year period
  • Hold less than $500 million in deposits and can demonstrate a clear pattern of recurring seasonal swings in funding needs

Your institution does not need to be a member of the Federal Reserve System in order to qualify for the Seasonal Credit Program.

How to get started

The first step is to establish access to the Discount Window by completing the required Operating Circular 10 agreements (Off-site) found on the Discount Window website. Contact (Off-site) your district for additional tools and instructions that may be available to help you complete the agreements.

You can read more about the program requirements (Off-site) on the Discount Window website. Applications should be submitted at least three weeks prior to the requested seasonal credit line start date. Following receipt of your completed application, we will determine your institution’s eligibility as well as the projected amount and duration of the seasonal credit line. Please note that all Discount Window loans must be fully secured to the satisfaction of the lending Reserve Bank and that adequate collateral (Off-site) must be pledged prior to initiating a loan request.

Do you need more information?

Our staff is ready to assist you. Please contact (Off-site) a representative from your district's Discount Window if you have additional questions.


Fed Facts: A closer look at the Beige Book

In this edition of Fed Facts, we’ll dive into the Summary of Commentary on Current Economic Conditions by Federal Reserve District, better known as the Beige Book (Off-site).

What is the Beige Book?

This report, published eight times each year, consists of anecdotal information on current economic conditions from a variety of business and community contacts outside of the Federal Reserve System. It characterizes regional economic conditions and prospects based on a variety of mostly qualitative information. The Federal Reserve first started publishing the Beige Book in 1983. In 2017, the book’s form and structure were updated with the intent of making the report easier to navigate and read.

How is the information collected?

Each Federal Reserve Bank gathers anecdotal information on current economic conditions in its District. This data is collected in a variety of ways, including through reports from Bank and Branch directors and interviews with key business contacts, economists, market experts and other sources. The responsibility to prepare an overall summary of the 12 district reports shifts between Federal Reserve Banks on a rotating basis.

How is the information used?

The anecdotal information collected in the Beige Book supplements the data and analysis used by Federal Reserve economists and staff to assess economic conditions in the Federal Reserve Districts. This information enables comparison of economic conditions in different parts of the country, which can be helpful for assessing the outlook for the national economy. It also serves as a regular summary of the Federal Reserve System's efforts to listen to businesses and community organizations.

Stay tuned to the Beige Book for qualitative economic condition updates throughout 2020. If you are interested in previous reports, archives (Off-site) are available as well.


Spring conference season is coming up

Now that 2020 is in full swing, it’s time to start getting ready for spring conference season! Each year, Fed representatives attend a wide variety of industry events across the country. These exciting events are great opportunities to learn more about Federal Reserve Bank Services, hear from interesting speakers, meet up with colleagues and make valuable connections. Fed representatives are always eager to speak with customers about our services, offerings and industry news. You can keep an eye out for them at industry events or plan in advance to meet up at conferences.

Action Item:

Are you planning to attend an industry event this year? Be sure to check out our Industry Events page or our Fed360® Dates to Remember page to make note of events we’re attending. You can also email this article to colleagues who may be attending industry events by clicking on the envelope icon towards the top of this page.

>>>>>>> c19a174... Test - Fed360 files =======

Fed Facts: Understanding the federal funds rate

The Federal Open Market Committee (FOMC) recently met for the first time of the year. This month’s Fed Facts article will cover the federal funds rate and one of the mechanisms that the FOMC uses to conduct monetary policy.

The FOMC meets eight times per year and consists of seven governors, the president of the Federal Reserve Bank of New York and four rotating slots shared by the 11 remaining Federal Reserve Bank presidents. The Reserve Bank presidents who are nonvoting members (i.e. off-rotation) still attend all the meetings and offer policy input. Their agenda includes reviewing economic and financial conditions, determining the appropriate monetary policy stance and assessing the risks to its long-run goals of price stability and sustainable economic growth. Minutes of these meetings are typically released three weeks after the date of the policy decision. Check out the FOMC Meeting calendars and information (Off-site) page to learn more.

2020 FOMC meeting schedule

  • January 28-29
  • March 17-18*
  • April 28-29
  • June 9-10*
  • July 28-29
  • September 15-16*
  • November 4-5
  • December 15-16*

* Meeting associated with a Summary of Economic Projections.

Federal funds target rate

Media coverage of FOMC meetings typically focuses on the 12 voting members’ decision on whether to adjust the federal funds target rate. The federal funds rate is the interest rate at which depository institutions trade federal funds (balances held at Federal Reserve Banks) with each other overnight. When a depository institution has surplus balances in its reserve account, it lends to other depository institutions in need of larger balances. In simpler terms, a depository institution with excess cash, also known as liquidity, will lend to another depository institution that needs to raise liquidity quickly.

The rate that the borrowing institution pays to the lending institution is determined between the two institutions. The weighted average rate for all of these types of negotiations is called the effective federal funds rate. The effective federal funds rate is essentially determined by the market but is influenced by the Federal Reserve through open market operations to reach the federal funds rate target.

The federal funds rate is the central interest rate in the U.S. financial market. It influences other interest rates such as the prime rate, which is the rate that depository institutions charge their customers with higher credit ratings. Additionally, the federal funds rate indirectly influences longer- term interest rates such as mortgages, loans and savings.

At its latest meeting, the FOMC voted to keep the target range for the federal funds rate at 1.5 to 1.75%. Read the Board’s press release (Off-site) for more information on this meeting.

Effective federal funds rate

The graph below, published by the Federal Reserve Bank of St. Louis’ FRED Economic Data (Off-site), shows how the effective federal funds rate has changed over time.

Effective federal funds rates and change over time

Shaded areas indicate U.S. recessions

Open market operations

The Federal Reserve influences the effective federal funds rate through open market operations (OMOs) (Off-site). These operations help the effective federal funds rate reach the federal funds rate target by influencing the cost and availability of money and credit in the U.S. economy by buying or selling government securities to adjust reserve levels in the banking system. Section 14 of the Federal Reserve Act grants the Federal Reserve the authority to conduct OMOs.

The resulting investments from OMOs are held in the System Open Market Account (SOMA) (Off-site), which is managed by the Federal Reserve Bank of New York. These securities serve as collateral for U.S. currency in circulation and other liabilities on the Federal Reserve System's balance sheet. They also serve as a tool for the Federal Reserve’s management of reserve balances and a tool for achieving the Federal Reserve’s macroeconomic objectives.

Learn more

For more information, visit the Monetary Policy (Off-site) section of the Board of Governors website. You can also check out The Federal Reserve System: Purposes and Functions (Off-site) publication, which provides an overview of the Federal Reserve System, monetary policy and the structure and members of the Board of Governors.


>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS
<<<<<<< HEAD
>>>>>>> 05a862e... 021820 Fed360 Initial Commit KS