A Tale of Demand and Supply for Central Bank Reserves

Sriya Anbil, Sebastian Infante and Zeynep Senyuz
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Sriya Anbil: https://www.federalreserve.gov/econres/sriya-l-anbil.htm
Sebastian Infante: https://www.federalreserve.gov/econres/sebastian-infante.htm

No 2026-028, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: In an ample-reserves framework, administered rates anchor money markets but suppress information from unsecured interbank trading. We recover that information by isolating the small interbank segment of the federal funds market. Using high-frequency bank-level data, we employ deposit shocks as an instrument for bank borrowing demand. Our analysis reveals that non-bank lenders, such as Federal Home Loan Banks, supply funds elastically, whereas bank lenders exhibit price inelasticity, which intensifies as their reserve balances decline, particularly for bankers’ banks. This interbank segment highlights distributional frictions in the federal funds market that emerge well before aggregate reserves become scarce and provides new evidence on monetary policy transmission in an ample-reserves regime.

Keywords: monetary policy implementation; balance sheet policy; central bank reserves; federal funds market (search for similar items in EconPapers)
Pages: 42 p.
Date: 2026-02
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:103338

DOI: 10.17016/FEDS.2026.028

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