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The Federal Reserve’s Two Key Rates: Similar but Not the Same?
Since the global financial crisis, the Federal Reserve has relied on two main rates to implement monetary policy—the rate paid on reserve balances (IORB rate) and the rate offered at the overnight reverse repo facility (ON RRP rate). In this post, we explore how these tools steer the federal funds rate within the Federal Reserve’s target range and how effective they have been at supporting rate control. The Federal Open Market Committee (FOMC) communicates its stance of monetary policy through a target range for the federal funds (fed funds) rate—the interest rate at which banks borrow funds overnight on an ... (full story)