Free Reserves

Ain’t nothing in life that's free...especially money. (And that whole "free lunch" thing applies here too.) Free reserves aren’t free in that sense, no. Free reserves are reserves that are “freed up,” meaning they aren’t tied up in investments or other obligations.

Free reserves are ready-to-go money that a bank holds on top of its required reserves (as in: required by law), and not including reserves borrowed from the central bank. Free reserves are important to banks because that’s the money that can be loaned to consumers, which lets the consumers buy baby buy buy...and makes the bank $$$.