Federal Reserve Economic Data

The FRED® Blog

Referring to the interest paid on reserves

A rate by any other name...

The Fed’s monetary policy tools are used to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy. These tools evolve over time as the economy evolves, and so it makes sense the terms that describe these tools also change.

The FRED graph above shows three different interest rates the Board of Governors has set on the reserve balances commercial banks keep at their corresponding Federal Reserve Banks. The time frame is between October 9, 2008, and when this post was written:

  • The interest rate on required reserves (the dashed red line) and the interest rate on excess reserves (the solid orange line) were identical. The former applied to balances kept in fulfillment of reserve requirement ratios, and the latter applied to balances kept in excess of those requirements. On March 26, 2020, the reserve requirement ratios were lowered to zero, so the distinction in the type of reserves lost any practical significance. Both of these interest rate data series were discontinued on July 28, 2021.
  • As of July 29, 2021, the “interest rate on reserve balances” (the solid blue line) became the new name of the interest rate paid by the Federal Reserve on all reserve balances kept by commercial banks.

The FRED Team uses an automated process to name many of its data series. This process makes tracing the current data back to their sources easier. For information on series name changes, copyright statements, and much more, check the metadata in the notes below every FRED graph.

How this graph was created: Search for and select “Interest Rate on Excess Reserves (DISCONTINUED).” From the “Edit Graph” panel, use the “Add Line” tab to search for and select “Interest Rate on Required Reserves (DISCONTINUED).” Repeat the last step to add “Interest Rate on Reserve Balances” to the graph. To change the style and color of the lines in the graph use the “Format” panel.

Suggested by Diego Mendez-Carbajo.

Where CPI inflation isn’t so high

Including a closer look at rents

There’s no doubt that consumer price inflation is relatively high. The consumer price index (CPI), though, is a composite of the prices of many goods and services. Thus, some show even higher inflation, such as energy and transportation, and others show lower inflation. This is what the FRED graph above is all about.

The blue bar shows overall CPI inflation. The other bars display specific categories with lower-than-average inflation. For example, both education and health services, which have had noteworthy price increases in the past, are showing much more restraint now. There are also puzzles, like alcoholic beverages, toys, and communications (for example, computers). Prices that are administratively set, such as water and trash collection, are fairly stable.

And then there’s a surprise: rents. The rent category in the CPI increases less than the overall CPI, but the news media have been referring to large rent increases for some time. Why the difference?

The reason is that the news media and the CPI consider different pools of rents. The news media mostly refer to rents that new renters face. The CPI has a rent pool that includes mostly continuing renters, whose rents are more stable or haven’t increased yet. In addition, the CPI’s rents survey samples participants every six months, precisely because rents are usually so stable. If rents have increased, there can be a delay in that increase showing up in the rents component of the CPI.

How this graph was created: Start from the CPI release table: Check the series to display, click “Add to Graph,” and shorten the sample period to the last two observations. From the “Edit Graph” panel, use the “Format” tab to choose the bar graph option.

Suggested by Christian Zimmermann.

Regional differences in mean and median family income

Growing inequality across and within regions

The FRED Blog has examined family incomes in the United States before, specifically the typical (or median) family income and its growing gap relative to the average (or mean) family income. Here, we revisit the topic of regional income inequality by comparing differences in the evolution of median and mean family income.

The FRED graph above uses U.S. Census data to show how different the typical (or median) family income is from the mean (or average) family income. The graph is divided into the four regions defined by the Census: Northeast, Midwest, South, and West.* Each line plots the regional dollar value, measured at 2020 prices, of mean family income divided by median family income.

In all four regions, the value of that ratio is larger than one, indicating that average income is larger than typical income. Moreover, that ratio is increasing in value over time, suggesting one of the following is happening: (1) rich families are becoming relatively richer, (2) poor families are becoming relatively poorer, (3) both (1) and (2) are happening at the same time in different proportions.

However, the trend of increasing family income inequality hasn’t followed the same pattern across all regions: It was slower to pick up in the Midwest, where it caught up to the rest of the country only in 2020. More data are needed to determine if this increased Midwestern family income inequality is permanent. Finally, the patterns discussed above also describe the evolution of mean and median personal income by region.

*See this map to find out which Census region you live in.

How this graph was created: Search for and select “Real Mean Personal Income in Midwest Census Region.” Next, customize the data by searching for and selecting “Real Median Personal Income in Midwest Census Region.” Next, create a custom formula to combine the series by typing in “a/b” and clicking “Apply.” Click the “Add Line” tab and repeat the previous three steps to add the data from the other three U.S. Census regions to the graph.

Suggested by Diego Mendez-Carbajo.



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