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How the Fed Adjusts the Fed Funds Rate within Its Target Range

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Abstract

At its June 2021 meeting, the FOMC maintained its target range for the fed funds rate at 0 to 25 basis points, while two of the Federal Reserve’s administered rates—interest on reserve balances and the overnight reverse repo (ON RRP) facility offering rate—each were increased by 5 basis points. What do these two simultaneous decisions mean? In today’s post, we look at “technical adjustments”—a tool the Fed can deploy to keep the FOMC’s policy rate well within the target range and support smooth market functioning.

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  • Gara Afonso & Lorie Logan & Antoine Martin & Will Riordan & Patricia Zobel, 2022. "How the Fed Adjusts the Fed Funds Rate within Its Target Range," Liberty Street Economics 20220112, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:93621
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    File URL: https://libertystreeteconomics.newyorkfed.org/2022/01/how-the-fed-adjusts-the-fed-funds-rate-within-its-target-range/
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    Cited by:

    1. Gara Afonso & Kyungmin Kim & Antoine Martin & Ed Nosal & Simon M. Potter & Sam Schulhofer-Wohl, 2023. "Monetary Policy Implementation with Ample Reserves," FRB Atlanta Working Paper 2023-10, Federal Reserve Bank of Atlanta.

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    Keywords

    technical adjustments; monetary policy implementation;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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