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2 posts on "effective federal funds rate"
April 3, 2023

Monetary Policy Transmission and the Size of the Money Market Fund Industry: An Update

Gara Afonso, Marco Cipriani, Catherine Huang, Abduelwahab Hussein, and Gabriele La Spada

photo: The Marriner S. Eccles Federal Reserve building in Washington, D.C. Photographer: Stefani Reynolds/Bloomberg

The size of the money market fund (MMF) industry co-moves with the monetary policy cycle. In a post published in 2019, we showed that this co-movement is likely due to the stronger response of MMF yields to monetary policy tightening relative to bank deposit rates, combined with MMF shares and bank deposits being close substitutes from an investor’s perspective. In this post, we update the analysis and zoom in to the current monetary policy tightening by the Federal Reserve.

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Posted at 7:00 am in Federal Reserve, Financial Intermediation, Financial Markets, Monetary Policy | Permalink
January 12, 2022

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

Gara Afonso, Lorie Logan, Antoine Martin, William Riordan, and Patricia Zobel

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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Posted at 7:00 am in Central Bank, Fed Funds, Federal Reserve, Monetary Policy | Permalink

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