FOMC Excerpt: Factors In Setting IOER, ON RRP Rates >

WASHINGTON (MNI) - The following is an excerpt from the Federal Open 

Market Committee minutes of the April 30 - May 1 meeting, published 

Wednesday:

     The deputy manager also discussed a staff proposal in which the 

Board would implement a 5 basis point technical adjustment to the 

Interest on Required Reserves (IORR) and IOER rates. The proposed action 

would bring these rates to 15 basis points below the top of the target 

range for the federal funds rate and 10 basis points above the bottom of 

the range and the overnight reverse repurchase agreement (ON RRP) offer 

rate. As with the previous technical adjustments in June and December 

2018, the proposed adjustment was intended to foster trading in the 

federal funds market well within the target range established by the 

FOMC. 

     A technical adjustment would reduce the spread between the IOER 

rate and the ON RRP offering rate to 10 basis points, the smallest since 

the introduction of the ON RRP facility. The staff judged that the 

narrower spread did not pose a significant risk of increased take-up at 

the ON RRP facility because repo rates had been trading well above the 

ON RRP offer rate for some time. However, if it became appropriate in 

the future to further lower the IOER rate, the staff noted that the 

Committee might wish to first consider where to set the ON RRP offer 

rate relative to the target range for the federal funds rate to mitigate 

this risk. 

     ** MNI Washington Bureau: (202)371-2121 ** 

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