The Federal Reserve Bank of St. Louis published the first major Fed educational article of 2026 on the penny transition. The piece outlines five economic arguments for elimination, explains the rounding framework, notes that cash now accounts for only 14% of U.S. transactions, and reveals that no Eighth District locations can currently fill penny orders due to insufficient inventory.
The Federal Reserve Bank of St. Louis published "Making Sense of Not Making Cents" on its Open Vault blog, providing a comprehensive public-facing explainer on the penny transition authored by Senior Editor Heather Hennerich with expert commentary from Scott Wolla, Assistant Vice President in the Economic Education Department.
Five Arguments for Penny Elimination
Wolla outlined five economic rationales for discontinuing penny production:
- Manufacturing cost — "It took 3.69 cents to make each 1-cent coin"
- Low purchasing power — Minimal ability to purchase anything with a single penny
- Minimal circulation — Coins sitting in jars don't facilitate transactions
- Environmental costs — Mining zinc and copper has ecological impacts
- International precedent — Canada (2012), Australia (1992), and New Zealand (1990) all successfully eliminated their lowest-value coins
Cash Usage in Decline
A 2025 Federal Reserve Financial Services study found that cash transactions dropped to only 14% of all U.S. transactions in 2024, further diminishing the penny's role in daily commerce.
Rounding Impact: Conflicting Research
The article presents competing findings on whether rounding harms consumers:
- The U.S. Treasury states that prices "will be rounded down just as often as they will be rounded up, so there should be no overall effect on consumer prices"
- A 2025 Richmond Fed analysis estimates consumers could pay approximately $6 million annually in cumulative "rounding tax"
- A 2018 Canadian study found grocery stores benefited more from rounding than consumers
- A 2007 U.S. convenience store study found the rounding effect would be "very, very small" with benefits favoring consumers
Eighth District Penny Shortage Already Hitting
The article reveals that the St. Louis Fed's main office and Memphis Branch began accepting penny deposits on January 14, 2026. However, as of January 20, no Eighth District locations were filling penny orders "due to insufficient inventory" — a sign that the transition is moving faster than some anticipated.
Historical Precedent
The article notes that the United States previously discontinued the half-cent coin in 1857. At the time, the half-cent was worth more than 8 cents in today's currency — a more significant elimination than the penny. Citizens adapted without difficulty.