Very nice article on the Federal Reserve and its interest payments to the banks.
http://www.businessinsider.com/fed-paid-banks-30-billion-on-excess-reserves-for-2017-2018-1?international=true&r=US&IR=T
One wonders what will happen when yields go up and the FRB unwinds its balance sheet in this environment. Will it have enough revenue to pay these interests on excess reserves, especially with higher fed funds rates. Will it have enough money left to remit to the treasury? We already see these remittances to the treasury going down since 2015. More debt will be issued once the treasury is empty again.
The Fed started to pay interest on reserve balances at the Fed since 2008, to address conditions in credit markets.
https://www.frbsf.org/education/publications/doctor-econ/2013/march/federal-reserve-interest-balances-reserves/
http://www.businessinsider.com/fed-paid-banks-30-billion-on-excess-reserves-for-2017-2018-1?international=true&r=US&IR=T
One wonders what will happen when yields go up and the FRB unwinds its balance sheet in this environment. Will it have enough revenue to pay these interests on excess reserves, especially with higher fed funds rates. Will it have enough money left to remit to the treasury? We already see these remittances to the treasury going down since 2015. More debt will be issued once the treasury is empty again.
The Fed started to pay interest on reserve balances at the Fed since 2008, to address conditions in credit markets.
https://www.frbsf.org/education/publications/doctor-econ/2013/march/federal-reserve-interest-balances-reserves/