The Feds Ample Reserve Framework (Part 5) - The Overnight Reverse Repo Facility

The Fed now changes short-term interest rates by changing its administered rates (the interest on reserve balance rate and the overnight reverse repurchase agreement rate). When they change these administered rates they change the Federal Funds Rate floor.  The floor is set within the federal funds rate target range.  This video explains how the Overnight Reverse Repo rate (ON RRP) acts as a floor for the Federal Funds Rate by providing non-bank financial institutions with a risk-free short-term interest rate.

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• #ample_reserve_framework
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• #demand_for_reserves