11. How the Fed Influences the Reserve Ratio The interest rate on reserves is the interest rate that the Fed pays banks for holding reserves on deposit at the Fed. For many years, open market operations were the Fed's primary tool for monetary policy. However, since October 2008, it relies more on interest on reserves. An increase in the interest rate on reserves tends to encourage banks to hold reserves. 11. How the Fed Influences the Reserve Ratio The interest rate on reserves is the interest rate that the Fed pays banks fo more g reserves on deposit at the Fed. For many years, open market operations were the Fed's primary tool for monetary policy. However, since Oc 08, it relies more on interest on reserves. An increase in the interest rate on reserves tends to encourage banks to hold less reserves.