Federal Reserve Float

Federal Reserve Float

Federal Reserve Float is created when the account of the depository institution presenting a check for payment is credited before the account fo the depository institution on which the check is drawn is debited. This situation can arise because credit is granted to the presenting depository institution on a preset schedule, whereas the paying institution's account is not debited until the check is physically presented to it. Float temporarily adds reserve balances to the depository system because, until the paying institution's account is debited, the two depository institutions essentially are credited with the same reserve balances. Float is the most volatile following inclement weather that disrupts the normal check-delivery process. - Federal Reserve Bulletin, Novemember 1997, page 860.