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MNI BRIEF: Fed Hikes IOER, Reverse Repo Rates By 5 bps


The Federal Reserve on Wednesday raised the rate of interest it pays banks to park their excess reserves at the U.S. central bank and the maximum rate it pays at its overnight repo operations by 5 bps each.

The moves are "intended to foster trading in the federal funds market at rates well within the Federal Open Market Committee's target range and to support the smooth functioning of short-term funding markets," the Fed said. Short-term money markets have been under pressure in part due to an unprecedented expansion of the Fed's balance sheet to a record USD7.9 trillion.

The central bank's reverse repo facility, aimed at alleviating short-term funding shortages, saw sharply increased usage to over USD350 billion in the last two months after a cap was lifted in March to USD80 billion from USD30 billion.
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