Prohibition on IOER Act of 2025

The Prohibition on IOER Act of 2025 proposes to change how the Federal Reserve interacts with commercial banks. Currently, the Federal Reserve pays interest to banks on the money they keep in their reserve accounts that exceeds the minimum amount required by law. This bill would strictly prohibit Federal Reserve banks from making these interest payments on those excess balances.

If enacted, this change could encourage commercial banks to move their extra cash out of Federal Reserve accounts and into the broader economy. Proponents of such measures often argue that stopping these payments could incentivize banks to increase lending to businesses and consumers rather than earning guaranteed interest from the government. However, it could also impact how the Federal Reserve manages national interest rates and inflation.

For the average citizen, the practical impact might be felt through changes in bank lending practices or shifts in the broader economy. Because the bill is in the earliest stages of the legislative process, it currently has no effect on existing banking regulations or interest rate policies.