Federal Reserve Float

DEFINITION of 'Federal Reserve Float'

Refers to the over-estimation of the country's money supply due to uncleared checks showing as an asset on the books of both the receiving and sending institution. This "double accounting" for a check occurs because the Federal Reserve generally credits a bank's account for the amount of a check within one to two days of that check being presented. However, it often takes slightly longer than that time for the same check to be presented to the issuing bank for actual payment of the funds, hence the double accounting of the amount.

The amount of float in the Federal Reserve System changes daily, weekly, and monthly. Typically, the first few banking days after the weekend, the end of the month and the holidays all experience a higher level of float due to an increased volume in processed checks.

BREAKING DOWN 'Federal Reserve Float'

One of the goals of an efficient banking system would be zero float, meaning that all money is withdrawn from one account and deposited into another the moment a check is presented. While this is not currently the case, it is important to note that the amount of float in the system has been cut dramatically over the last few decades due to active anti-float programs from the Federal Reserve and an increasing move towards the electronic transfer of funds. It's not unreasonable to expect that Federal Reserve float will be virtually eliminated in the next few decades.

RELATED TERMS
  1. Float

    Money in the banking system that is briefly counted twice due ...
  2. Float Time

    The amount of time between when an individual writes and submits ...
  3. Negative Float

    The period of time between when a bank customer writes a check ...
  4. Book Balance

    Funds on deposit prior to any adjustment for check clearing, ...
  5. Availability Float

    The time period between when a deposit is made and when the funds ...
  6. Immediate Credit

    The Federal Reserve practice of "clearing" checks deposited by ...
Related Articles
  1. Savings

    Explaining Checking Accounts

    A checking account is an account at a financial institution, usually a bank, that allows for deposits and withdrawals.
  2. Investing Basics

    Float

    Float is money in the banking system that is briefly counted twice due to delays in processing checks.
  3. Investing Basics

    Calculating Floating Stock

    Floating stock is the number of shares a company has available for trade in the open market.
  4. Options & Futures

    Demystification Of Bank Accounts

    Find out which type of account suits your specific needs.
  5. Investing Basics

    Floating Stock

    Floating stock is the number of a company’s shares that are available for the public to buy and sell.
  6. Personal Finance

    How The U.S. Government Formulates Monetary Policy

    Learn about the tools the Fed uses to influence interest rates and general economic conditions.
  7. Economics

    Regional Banks Give The Fed A National Perspective

    We all know that the Federal Reserve utilizes monetary policy to control the economy, but what do the 12 regional Federal Reserve Banks do?
  8. Savings

    Top 5 Reasons Banks Won't Cash Your Check

    Learn the top reasons that a bank won't cash your check, and find out what steps you can take to prevent those scenarios from happening.
  9. Savings

    2015's Top Checking Account Promotions

    Open a checking account in 2015 and the bank could give you a cash bonus. Check out these top offers.
  10. Economics

    What's the Federal Funds Rate?

    The federal funds rate is the interest rate banks charge each other for overnight loans to meet their reserve requirements.
RELATED FAQS
  1. In what ways has technology helped to reduce float?

    Learn more about the impact of float on the U.S. monetary system and how technology has changed the amount of float as measured ... Read Answer >>
  2. How does float affect the nation's money supply?

    Learn how float affects the appearance of the nation's money supply, and receive a brief lesson on how the U.S. government ... Read Answer >>
  3. Why does float usually increase at the beginning of the week?

    Find out more about float and how checking float is created in the American banking system. Learn more about why the Federal ... Read Answer >>
  4. What months of the year typically have the highest float?

    Learn more about how float occurs within the United States and how it is monitored. Find out why float frequently happens ... Read Answer >>
  5. What is the difference between holdover float and transportation float?

    Find out about float, which may become a thing of the past due to the steady decline of check writing and new services in ... Read Answer >>
  6. What does floating stock tell traders about a particular stock?

    Learn about what floating stock tells a trader about a particular stock. One commonality of the biggest winners in stock ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center