The Federal Reserve increased the federal funds rate target range to 3.75%–4% on September 16. Simultaneously, the interest rate paid on reserve balances rose from 3.65% to 3.90%. This shift impacts the economics of liquidity for banks, particularly regarding the prefunding required for cross-border payments through correspondent banking networks.
Banks now face higher opportunity costs for holding non-interest-bearing or low-yielding balances meant for payment execution. As the return on reserve balances at the central bank increases, banks have a stronger incentive to optimize liquidity management. Research indicates that policy rate changes influence commercial bank funding costs, with non-deposit liabilities showing higher sensitivity.
The rate hike also affects corporate working capital. Companies using floating-rate credit facilities to finance inventory and international supplier obligations may see increased financing expenses. According to PYMNTS Intelligence and Mastercard, 57% of U.S. small and mid-sized businesses source inputs overseas, with 63% of internationally active firms paying suppliers primarily in dollars.
Despite the rising costs, banks remain the primary channel for cross-border transactions. In 2025, 64% of internationally active U.S. SMBs utilized traditional banks for these payments, with 69% expecting to do so in 2026. For 43% of SMBs with global suppliers, faster payment processing and settlement have become the top priority to improve liquidity efficiency.
