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The Federal Reserve has several monetary policy tools. How does the interest rate at the overnight reverse repurchase program (ON RRP) interact with other monetary
The Federal Reserve has several monetary policy tools. How does the interest rate at the overnight reverse repurchase program (ON RRP) interact with other monetary policy tools?
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- The ON RRP rate is set at the 10-year Treasury rate to help control the yield curve.
- The ON RRP rate is set 5 basis points above the interest on reserves to limit arbitrage between reserves and other funding markets.
- The ON RRP rate is set at the lower end of the target range for federal funds providing a lower bound for the federal funds rate.
- The ON RRP rate is set at the same rate as prime rate at the discount window to enforce the upper bound of the federal funds rate.
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