Speaker: Sebastián Infante
Co-author: Sriya Anbil, Zeynep Senyuz
Affiliation: Federal Reserve Board
Date and time: Monday, April 21, 2025 12:00 (Santiago, GMT-04:00)
Location:

• Auditorio at the Central Bank of Chile, Morandé 115, second floor.
• Online meeting

Registration: seminarios@bcentral.cl

Abstract: We provide a new framework for understanding demand and supply in the interbank market for central bank reserves in the U.S., the federal funds market. Using high frequency bank-level data on reserves and deposits, we show only a subset of domestic banks meaningfully increase reserves in response to deposit inflows, highlighting the importance of bank heterogeneity. Building upon insights from the market microstructure and leveraging banks’ response to deposit shocks, we find that bank lenders are price inelastic, and their lending becomes even more inelastic as the level of reserves in the banking system declines. Our results underscore the importance of unpacking micro-level data to understand how the market for central bank reserves operates, and thus, may help inform monetary policy implementation.