IORB
The rate the Fed pays banks on reserves held at the Fed — its primary administered tool for steering the fed funds rate within target.
IORB (Interest on Reserve Balances) is the interest rate the Federal Reserve pays commercial banks on the reserve balances they hold at the Fed. The Fed has paid interest on reserves since 2008 (originally as IOER/IORR, consolidated into a single IORB rate in July 2021); in the post-2008 "ample reserves" framework IORB is the primary lever the Fed uses to keep the effective fed funds rate inside the FOMC's target range.
The mechanism is a floor: no bank will lend reserves in the fed funds market for meaningfully less than it can earn risk-free by parking them at the Fed, so IORB anchors the bottom of short-term rates. In practice it is a "leaky floor": the effective fed funds rate normally trades a few basis points below IORB because the dominant fed-funds lenders (GSEs and Federal Home Loan Banks) cannot earn IORB and so lend below it. Together with the overnight reverse repo (ON RRP) rate — a floor for non-banks like money market funds — IORB lets the Fed set rates by administration rather than by adjusting reserve scarcity.
The practical takeaway: when the FOMC moves its target range, it adjusts IORB (and ON RRP) by the same amount. Watching where the effective fed funds rate trades relative to IORB is a real-time gauge of reserve abundance — if EFFR drifts up toward or above IORB, reserves are getting scarce.
Related Terms
Discount Rate
The interest rate the Federal Reserve charges commercial banks for direct short-term borrowing from the Fed's discount window.
IntermediateFederal Funds Rate
The overnight interest rate at which U.S. banks lend reserve balances to each other — the primary policy rate the Fed targets to steer the economy.
IntermediateFOMC
The Federal Open Market Committee — the Fed body that sets U.S. monetary policy, meeting eight times per year to vote on the federal funds rate target.
IntermediateSOFR
Secured Overnight Financing Rate — the benchmark short-term interest rate based on actual overnight Treasury repo transactions, replacing LIBOR.
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