Today's Biggest Winner: Banks To Get An Extra $5 Billion In Interest From The Fed

Today's 25bps hike in rates to 1.75% will have little impact on how much interest is paid to the trillions of dollars held in checking and savings accounts across the US (simply because banks continue to drown in over $2 trillion in excess reserves and thus do not really need all those deposits). It will, however, have a notable impact on how much cash the Fed pays out to banks in the form of interest on excess reserves (just don't call it a subsidy).

As the chart below shows, after today's rate hike, the Fed will be paying $37 billion in annualized interest to banks, an increase of $5 billion from the last rate hike.

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