The interest rates and these tools provide a passage in which the money market interest rates can fluctuate. The minimum reserve requirements serve as a tool targeting at regulating the banking system liquidity and stabilizing the money market interest rates. The amount of minimum reserves to be held by each commercial bank is determined in relation to its reserve base applying the required reserve ratio.
The interplay between interest rates and these tools influences money market interest rates. Minimum reserve requirements are used as a tool to manage banking system liquidity and stabilize those interest rates. The amount of minimum reserves that commercial banks must hold is determined based on their total reserves, using the required reserve ratio.