IORB explained: Fed reserve rate definition
By Ken Chigbo, Founder, KenMacro. Published 2026-05-13.
Quick answer
IORB, or interest on reserve balances, is the rate the Federal Reserve pays commercial banks on reserves held at the Fed. It functions as the primary administered rate that anchors the effective federal funds rate, sitting near the top of the policy corridor and acting as a soft ceiling on overnight unsecured lending.
What is IORB?
IORB stands for Interest on Reserve Balances, the rate the Federal Reserve pays depository institutions on balances held in their master accounts at regional Fed banks. Introduced in its current single-rate form in 2021, IORB replaced the older split between interest on required reserves and interest on excess reserves. It sits alongside the overnight reverse repo rate as one of the Fed’s two administered rates, and together they form the operational floor system that the FOMC uses to steer the effective federal funds rate inside its target range.
How traders use IORB
Traders watch IORB because it is the cleanest signal of where the Fed wants overnight USD funding to settle. When the FOMC announces a rate decision, the IORB level is published in the implementation note alongside the target range, and any technical adjustment to IORB relative to the range midpoint tells the desk whether the Fed is trying to push the effective funds rate higher or lower within the band. Money market funds, prime brokers, and FX swap desks price short-dated USD off this rate, so shifts feed directly into the front end of the SOFR curve, EUR/USD basis, and DXY. Retail macro traders typically use IORB changes as confirmation that the Fed’s stance on liquidity is tightening or easing at the plumbing level, not just the headline level.
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Common misconceptions about IORB
The most frequent error is treating IORB as the Fed funds rate itself. It is not. The federal funds rate is a market-determined overnight rate at which banks lend reserves to one another, while IORB is an administered rate paid by the Fed. A second misconception is that only banks care about IORB. In practice, every USD funding market references it indirectly through arbitrage with the reverse repo facility, which non-bank counterparties such as money market funds can access. A third confusion is conflating IORB with the discount rate, which is what banks pay to borrow from the Fed, not what they receive.
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Frequently asked
What is the difference between IORB and the federal funds rate?
IORB is the administered rate the Fed pays banks on reserves parked at the central bank. The federal funds rate is the market rate at which banks lend reserves to each other overnight on an unsecured basis. The FOMC sets a target range for the funds rate, then uses IORB and the overnight reverse repo rate to keep the actual traded rate inside that range. IORB is the policy lever, the effective funds rate is the outcome.
Why did the Fed replace IOER with IORB?
Before July 2021, the Fed paid two separate rates: interest on required reserves and interest on excess reserves, abbreviated IORR and IOER. Because reserve requirements were cut to zero in March 2020, the distinction lost any practical meaning. The Fed consolidated them into a single IORB rate to simplify the operational framework and reflect the reality that all reserves are now effectively excess reserves under the abundant reserves regime.
How does IORB affect the US dollar in FX markets?
IORB sets the floor on short-dated USD funding costs. When the Fed raises IORB, holding dollar reserves becomes more attractive, which tends to widen interest rate differentials in favour of USD and supports the dollar against lower-yielding currencies. The effect flows through SOFR, the FX swap basis, and forward points. The desk tracks IORB alongside the ECB deposit facility rate and BoJ policy balance rate to map relative funding conditions across the majors.
Where can I find the current IORB rate?
The Federal Reserve Board publishes the current IORB rate on its website under the policy tools section, and it is restated in every FOMC implementation note released alongside rate decisions. Historical series are available on the FRED database maintained by the St. Louis Fed under the ticker IORB. The rate updates only when the Fed makes a policy or technical adjustment, so it is stable between meetings unless the desk announces an off-cycle change.
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