CHICAGO, June 1 (Reuters) - The interest rate banks charge each other for overnight loans eased closer to a record low as May wrapped up on Friday, but the move is unlikely to prompt U.S. Federal Reserve action unless it stays at the lower level. The Fed Funds effective rate (EFFR) fell from 0.06% to 0.05% on Friday, just above a record low of 0.04% last reached in April 2020. It was previously at 0.05% at the end of April, but bounced back to 0.06% at the beginning of May, where it remained until Friday. Gennadiy Goldberg, senior US rates strategist at TD Securities, said month-end effects drove the drop. “If the 5-basis-point reading is sustained past month-end, the Fed can raise IOER and RRP at the June meeting. However, if EFFR bounces back up to 6 basis points, the Fed may not look to adjust rates higher just yet,” he said. The interest rate on excess reserves (IOER) is currently at 0.10%, and the overnight reverse repurchase rate (RRP) is currently at 0%. The two help the central bank keep the fed funds rate within the target range. Fed policymakers meet on June 15 and 16. Analysts also pointed to pressure on short-term rates from an ongoing glut of cash. “The buildup of cash in the system driven by the Fed’s $120 billion of monthly asset purchases, Treasury drawing down its general account at the Fed, and negative bill supply are all putting downward pressure on front end rates broadly,” said Zachary Griffiths, macro strategist at Wells Fargo. The amount of money cash-heavy financial institutions have been loaning to the central bank overnight has been growing since March, hitting an all-time high of $485 billion last Thursday. On Tuesday, the New York Fed accepted nearly $448 billion for the daily RRP operation. (Reporting by Karen Pierog; editing by Jonathan Oatis) Our Standards: The Thomson Reuters Trust Principles.