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2008, No. 15
Posted 2008-07-01

Monetary Policy’s Third Interest Rate

The implementation of monetary policy in developed economies, in addition to a policy target rate and one or more discount rates, features a third, less-discussed interest rate—the “remuneration rate,” which is the rate of interest the central bank pays on the deposits that banks hold at the central bank. The Federal Reserve's current prohibition from paying explicit interest on deposits held at the Federal Reserve will end in 2011.