Federal Reserve's Balance Sheet Changes to Impact Overnight Interest Rates.
The Federal Reserve's balance sheet and overnight interest rates are studied in this paper. By analyzing how the Fed's assets affect the supply and demand for excess reserves, the researchers found that further monetary policy changes have limited impact on overnight rates due to high reserve levels. As the Fed reduces excess reserves, the federal funds rate is projected to rise to around 70 basis points, settling between the discount rate and the interest rate on excess reserves.