Fed Funds

GovernmentcheckThe Fed paid banks $7 billion in interest on $3 trillion in excess reserves parked at the Fed. The primary way the Fed will raise short-term rates is by increasing the rate they pay banks on those reserves. Thus in 2015 interest payments may double. Luckily, the Fed can afford it; they returned a record $98.7 billion to the Treasury on $115.7 billion in interest on its $4.5 trillion in holdings.

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