Draining reserves

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.
References in periodicals archive ?
Of note, Treasury cash balance have been on the rise following the tax date, draining reserves from the system.
If it wanted the rate to rise, the desk would sell securities, draining reserves and prompting banks to charge more to lend out what they had left.
Patterson presented to the board a history of the Foundation's income from the IOTA program, its efforts to build reserves, and how the recession and resulting nearly nonexistent interest rates decimated its prime source of income, thereby draining reserves. Currently, the Foundation gets around $6 million from its IOTA program, but hands out around $12 million in grants--a significantly lower grant amount than just a few years ago.
Ramez said he believes the exchange rate will become stable again when the economy's performance improves, and added that his mission is to "build up a solid reserve through real economic activity and direct and indirect foreign investment, not to eliminate the black market, even at the expense of draining reserves".
Summary: Weaker pound would quickly spur export industries; Cenbank support of currency seen draining reserves; Steady pound needed stability, other analysts argue
"Two tools for draining reserves from the system are being developed and tested and will be ready when needed.
I would argue that this language contains much more direct and valuable information about the likely path of the short-term interest rate target than does any decision about draining reserves. Indeed, it will be difficult for market participants to make precise inferences about the timing of increases in the target interest rate from the patterns of reserve draining alone, in part because the FOMC has not specified the path of reserves it intends to achieve before raising interest rates.
The governor is worried that legislators, eager to keep their constituents happy in an election year, would seek ways to paper over the shortfall - draining reserves, shifting funds forward from future budget periods and using other devices to avoid deep cuts in state services.
"The Fed will have the additional task of draining reserves and will use a set of instruments to accomplish this.
Other Fed officials have suggested alternative methods such as raising the interest rate the central bank pays on bank reserves or relying on draining reserves directly from the system through short-term transactions.[Editorial queries for this story should be sent to gbn@enpublishing.co.uk]
"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.
The FOMC then might attempt to push the funds rate back up to its target level by draining reserves through open market operations.