The Fed’s rate freeze will mean nothing unless banks fix a repo market bottleneck

The Federal Reserve held its rate target range at 3.75%-4% on Oct. 28, with operating instructions effective the following day setting out how to implement that stance across bank reserves and overnight funding markets. The Federal Open Market Committee's October decision passed 10-2, with Lisa D. Cook and Beth M. Hammack dissenting and preferring a quarter-percentage-point increase. The Oct. 29 accompanying implementation note maintains interest on reserve balances (IORB) at 3.9%, with standing overnight repo at 4% and reverse repo offered at 3.75%. The 3.75%-4% range is the FOMC's policy target for the federal funds market, where banks and other eligible entities borrow and lend balances held at the Fed overnight without collateral.

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