Thursday, September 17 2026
Thursday, September 17 2026
MONETABRIEF – The US Federal Reserve has raised interest rates by 25 basis points to 3.75-4.00 percent, but its excess reserve regime will continue with no reduction as American inflation continues to be high amid emerging sovereign debt jitters.
"The Committee decided to raise the target range for the federal funds rate by ¼ percentage point to 3-3/4 to 4 percent, in support of the Federal Reserve's dual mandate," the Fed said in a statement.
"The Committee is continuing its policy of maintaining ample reserves in the banking system."
Ample reserves, or excess liquidity was legitimized in 2019 and the Federal Reserve abandoned an earlier strategy to return to a scarce reserve regime.
Under ample reserves, a central bank loses control of reserve money, which is the only variable it can effectively control.
While it can still push up rates with a so-called 'floor system' excess reserves allow banks to continue to give credit without real deposits.
The implementation note also gave the open market desk leeway to print money to maintain excess liquidity.
"When appropriate, increase the System Open Market Account holdings of securities through purchases of Treasury bills and, if needed, other Treasury securities with remaining maturities of 3 years or less to maintain an ample level of reserves," the direction to the trading desk said.
"Roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities.
"Reinvest all principal payments from the Federal Reserve's holdings of agency securities into Treasury bills."
Central banks in advanced nations which have controlled inflation better are either reducing excess reserves (ECB) or have already returned to scarce reserve regimes (Sweden).
Some nations in East Asia, including Singapore seems to have a better grip on inflation than the US.
Sri Lanka's central bank which intervenes in forex markets to build reserves with newly created money (pegs) mainly generates inflation and social unrest by depreciating the currency.
(Colombo/Sept17/2026)
| 3 month bill | 9.22% | 22bp ▼ |
| 12-m bill | 9.91% | 10bp ▼ |
| Gold (Ounce) | $4602 | - - |
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