Skip to Main Content

Economic Brief

March 2010, No. 10-03

Excess Reserves and the New Challenges for Monetary Policy

Huberto M. Ennis and Alexander L. Wolman

Interest on reserves allows the Federal Reserve to pursue an appropriate monetary policy even with a high level of excess reserves. However, a banking system flush with excess reserves can raise the risk of monetary policy getting behind the curve.

Additional Resources

Bernanke, Ben S. "The Federal Reserve's Balance Sheet: An Update." Speech to the Federal Reserve Board Conference on Key Developments in Monetary Policy, Washington, D.C., October 8, 2009.

Plosser, Charles I. "Monetary Policy and the Wisdom of Wayne Gretzky." Speech to the 31st Annual Economic Seminar, Rochester, N.Y., December 1, 2009.

Walter, John R. and Renee Courtois. "The Effect of Interest on Reserves on Monetary Policy." Richmond Fed Economic Brief, EB 09-12, December 2009.

Woodward, Susan and Robert Hall. "The Fed Needs to Make a Policy Statement." Financial Crisis and Recession blog, April 13, 2009.

Subscribe to Economic Brief

Receive an email notification when Economic Brief is posted online:

Subscribe to Economic Brief

Phone Icon Contact Us

RC Balaban (804) 697-8144