The Fed Is Quietly Handing Out $250 Million To A Handful Of Happy Recipients Every Single Day

The Fed's QE may be over, and QT may be just starting, but don't think the Fed free money giveaway is ending any time soon.

While one can debate for hours why there is a record $2.330 trillion in cash parked at the Fed's overnight facility and what it means for systemic plumbing problems, the fact is that there is a record $2.33 trillion in cash parked at the Fed's overnight facility, doing nothing.

How big is this particular Golden Goose? The chart below shows the payment in interest that the Fed makes day on this record $2.33 trillion in funds: as of today it amounts to just over $100 million every single day! That's right, more than $100 million in interest payments on funds parked with the Fed, which is by definition the world's only risk-free counterparty!

"Remember excess reserves? Well, technically excess reserves ended in March 2020 when the Fed reduced reserve requirement ratios to zero, thus converting the trillions in reserves held at the Fed from"excess reserves: to plain old "Reserves" and which as of today amount to $3.13 trillion.

Whatever they are called now reserves parked at the Fed also collect interest, and as of today, the Fed's Interest on Reserves rate, or IOER, is 1.65%. This translates into $141 million in daily interest payments every single day to the various banks whose reserves are parked at the Fed!

Combining the two we get nearly a quarter billion, or to be precise $242 million and rising, in interest payments by the Fed - this is money which is printed into existence - every single day.

All of the above is with the Fed Funds rate at 1.75%. As a reminder, the Fed hopes to keep hiking at least another 175bps in the next 6 months, which will push the rate to 3.50% and will mean that the Fed will be paying half a billion in interest every single day to a handful of mostly unknown counterparties every day, money which for said counterparties is also known as profit and which is only the result of the Fed's previous money printing.
 

https://www.zerohedge.com/markets/fed-quietly-handing-out-250-million-handful-happy-recipients-every-single-day