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vichka [17]
3 years ago
11

Why does fed pay interest to banks?

History
1 answer:
chubhunter [2.5K]3 years ago
3 0

Answer: Hope it helps!

If its correct, can you give my brainliest im so close to ranking! Thank you

Explanation:

Essentially, paying interest on reserves allows the Fed to place a floor on the federal funds rate, since depository institutions have little incentive to lend in the overnight inter bank federal funds market at rates below the interest rate on excess reserves.

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