required reserve rate

Definition

Rate of deposits to the Federal Reserve or liquid cash that a given bank must maintain as required by the Federal Reserve. The Federal Reserve uses this rate to evaluate current credit conditions and may change key interest rates depending on the required reserve rate.

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You should try and make sure that you don't ever get below the required reserve rate or you may face problems.

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The required reserve rate was a necessary requirement that allowed the banks to operate transparently and demonstrated the wherewithal to pay most withdrawals.

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Each bank must meet a required reserve rate of liquid cash to ensure that the federal reserve can allocate key interest rates properly and fairly throughout finicial institutions.

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