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Draining Reserves

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Draining reserves
Federal Reserve System's course of action to tighten the money supply by (1) raising a bank's minimum reserve requirements, (2) selling bonds in the open market, (3) raising the rate at which banks borrow from the Fed, or (4) through draw-downs.

Draining Reserves
The practice of a central bank reducing the money supply. Examples of draining reserves include selling Treasury securities (or the equivalent in different countries), raising interest rates at which banks borrow from the central bank or from each other, and increasing banks' reserve requirements. All these measures are designed to reduce the amount of money in circulation in order to combat inflation.


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Walking a financial tightrope, officials say they will put off rate hikes for one year and cover a projected $112 million deficit by draining reserves to just $66 million by the end of the budget year.
It also warns against using one-time techniques to partially offset cuts: draining reserves, borrowing, using accounting tricks.
Insurance increases are driving many SMEs out of business, wiping out profits, draining reserves and in some instances even forcing companies into the shadow economy," he claimed.
 
 
 
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