<p><strong>Not my field but I think this is a basic overview. If there are mistakes, please let me know and I can edit.</strong> </p>

<p>The monetary authority in the U.S. uses open-market purchases to manipulate a chosen policy instrument in an effort to effect macroeconomic aggregates. There is a general consensus now that the Fed's instrument is the effective federal funds rate, which is the weighted average of the rates at which banking institutions loan money to one another. So, monetary authorities use open market purchases in an effort to make this weighted average (the 'effective' rate) match their target rate. </p>

<p>There is another rate that matters here - the discount rate. The discount rate is the cost that banking institutions face to borrow funds from the Fed's discount window (which is a separate instrument of monetary policy). And note that the discount rate is distinctly different from the FFR. This rate, historically, trends slightly higher than the FFR. </p>

<p>The two rates above effectively allow the Fed to control the cost at which banks can borrow money. The first rate governs the cost of borrowing from other banking institutions. The second rate governs the cost of borrowing (for banks) from the Fed. </p>

<hr>

<p>If I understand you correctly, you are also curious about the interest paid on deposits held by the Fed. That is, the interest that banking institutions earn on deposits with the Fed. </p>

<p>The Fed pays interest both on required reserves and on excess reserves. </p>

<p>Interest on Required Reserves (IORR) - this rate is set by the board and is intended to offset the implicit tax that required reserves imposed on banks. </p>

<p>Excess Reserves - The Fed began paying interest on excess reserves in 2008. According to Bernanke, this rate is another tool of policy that allows the Fed to set a floor on the overnight rate (synonymous with FFR). </p>

<hr>

<p>Sources that will allow you to gain more depth: </p>

<p><a href="https://en.wikipedia.org/wiki/Excess_reserves#In_the_United_States_.282008-.29" rel="nofollow noreferrer">excess reserves</a>  </p>

<p><a href="https://en.wikipedia.org/wiki/Discount_window" rel="nofollow noreferrer">discount window/discount rate</a></p>

<p><a href="https://en.wikipedia.org/wiki/Federal_funds_rate" rel="nofollow noreferrer">federal funds rate</a></p>

<p><a href="https://en.wikipedia.org/wiki/Open_market_operation" rel="nofollow noreferrer">open market operations</a></p>

CC BY-SA 3.0
2017-01-22T17:03:46.960Z
Also - I believe the Fed turns over any "profits" to the US treasury. It doesn't operate for profit. It operates in accordance with its mandate to its dual mandate.
123
CC BY-SA 3.0
2017-02-21T18:38:38.630Z
You are right 123, Fannie Mae And Freddie Mac are a strange example to look into, while the shareholder are the technical owners the Treasury Department control them and hence their profits. They currently have an active 'Warrant to buy' which they can use to take control of nearly 80% of the common stock.
Ian Brigmann
CC BY-SA 3.0
2017-04-22T22:37:30.230Z
This answer is correct with regards to borrowing by the US Federal Government, but the original question was about the Treasury. The Treasury is not normally in the lending business. Perhaps the answer could be modified to take this into account?
Brian Romanchuk
CC BY-SA 3.0
2017-01-22T17:02:24.210Z
2017-01-22T17:02:24.210Z
123
<p>The detail answer for your question is all here : </p>

<p><a href="https://en.wikipedia.org/wiki/Federal_funds_rate" rel="nofollow noreferrer">Federal funds rates</a></p>

CC BY-SA 3.0
2016-12-22T11:50:45.693Z
2016-12-22T11:50:45.693Z
mootmoot
<p>Banks have higher interest rate for debts than deposits to make money but does the U.S. treasury have the same interest rate for loans and deposits? </p>

CC BY-SA 3.0
2016-12-22T06:37:22.813Z
US treasury is not a bank. Nor does it control the interest rates directly. Could you please elaborate your question.
Sub-Optimal
CC BY-SA 3.0
2016-12-29T22:33:44.823Z
I know the US treasury is not a bank. I was just asking if they have different interest rates for when you invest in a treasury bond and you borrow money from the US treasury.
Alius Gobez
<interest-rate><federal-reserve><bonds>
Federal Reserve Interest
Alius Gobez
# Federal Reserve Interest

(Asked by: username_0 on 2016-12-21)

Banks have higher interest rate for debts than deposits to make money but does the U.S. treasury have the same interest rate for loans and deposits?

**Tags:** interest-rate, federal-reserve, bonds

> **Comments:**
> **username_1**: US treasury is not a bank. Nor does it control the interest rates directly. Could you please elaborate your question.  
> **username_0**: I know the US treasury is not a bank. I was just asking if they have different interest rates for when you invest in a treasury bond and you borrow money from the US treasury.  

---

## 2 answers

### Answer by username_2 on 2017-01-22. Score: 1

**Not my field but I think this is a basic overview. If there are mistakes, please let me know and I can edit.**

The monetary authority in the U.S. uses open-market purchases to manipulate a chosen policy instrument in an effort to effect macroeconomic aggregates. There is a general consensus now that the Fed's instrument is the effective federal funds rate, which is the weighted average of the rates at which banking institutions loan money to one another. So, monetary authorities use open market purchases in an effort to make this weighted average (the 'effective' rate) match their target rate.

There is another rate that matters here - the discount rate. The discount rate is the cost that banking institutions face to borrow funds from the Fed's discount window (which is a separate instrument of monetary policy). And note that the discount rate is distinctly different from the FFR. This rate, historically, trends slightly higher than the FFR.

The two rates above effectively allow the Fed to control the cost at which banks can borrow money. The first rate governs the cost of borrowing from other banking institutions. The second rate governs the cost of borrowing (for banks) from the Fed.

---

If I understand you correctly, you are also curious about the interest paid on deposits held by the Fed. That is, the interest that banking institutions earn on deposits with the Fed.

The Fed pays interest both on required reserves and on excess reserves.

Interest on Required Reserves (IORR) - this rate is set by the board and is intended to offset the implicit tax that required reserves imposed on banks.

Excess Reserves - The Fed began paying interest on excess reserves in 2008. According to Bernanke, this rate is another tool of policy that allows the Fed to set a floor on the overnight rate (synonymous with FFR).

---

Sources that will allow you to gain more depth:

[excess reserves](https://en.wikipedia.org/wiki/Excess_reserves#In_the_United_States_.282008-.29)

[discount window/discount rate](https://en.wikipedia.org/wiki/Discount_window)

[federal funds rate](https://en.wikipedia.org/wiki/Federal_funds_rate)

[open market operations](https://en.wikipedia.org/wiki/Open_market_operation)

> **Comments:**
> **username_2**: Also - I believe the Fed turns over any "profits" to the US treasury. It doesn't operate for profit. It operates in accordance with its mandate to its dual mandate.  
> **username_3**: You are right 123, Fannie Mae And Freddie Mac are a strange example to look into, while the shareholder are the technical owners the Treasury Department control them and hence their profits. They currently have an active 'Warrant to buy' which they can use to take control of nearly 80% of the common stock.  
> **username_4**: This answer is correct with regards to borrowing by the US Federal Government, but the original question was about the Treasury. The Treasury is not normally in the lending business. Perhaps the answer could be modified to take this into account?  

---

### Answer by username_5 on 2016-12-22. Score: 0

The detail answer for your question is all here :

[Federal funds rates](https://en.wikipedia.org/wiki/Federal_funds_rate)


---

