Fed Funds Rate Seen Edging Higher Within Range as Costs Rise

The effective federal funds rate — which has held near the bottom of the Federal Reserve’s target range for its benchmark over the past two years — could soon edge higher in a sign that excess bank reserves are dwindling faster than expected.

A combination of factors stemming from Treasury’s move to increase short-term bill issuance since July is luring funds away from the financial system and putting pressure on ultra short-term rates.

While fed funds is designed to fluctuate within a 25 basis-point target range, it has barely oscillated over the past two years except when the Fed itself ...