The Federal Reserve held its target range at 3.75%-4% on Oct. 28, with operating instructions effective the following day setting out how the stance would be implemented across bank reserves and overnight funding markets.
The Federal Open Market Committee decision passed 10-2, with Lisa D. Cook and Beth M. Hammack dissenting and preferring a quarter-percentage-point increase.
Implementation terms
The Oct. 29 implementation note maintains interest on reserve balances at 3.9%, with standing overnight repo at 4% and reverse repo offered at 3.75%. The target range is the FOMC’s policy target for the federal funds market, where eligible entities borrow and lend balances held at the Fed overnight without collateral.
Administered rates help keep that market rate within the target range. The implementation note sets out facility terms, while transaction results would show where overnight funding actually cleared.
Repo and reverse repo roles
At the directive’s 4% rate, standing overnight repo offers secured overnight funding. In a repo, the New York Fed’s trading desk buys securities with an agreement to resell them. The transaction temporarily adds reserves and helps limit upward pressure on money-market rates.
Overnight reverse repo works in the opposite direction. The Desk sells securities with an agreement to buy them back, temporarily reducing reserves. The reverse repo terms also include a $160 billion daily limit per counterparty.
Conditional Treasury purchases
The directive conditionally permits the Desk, when appropriate, to increase the System Open Market Account’s holdings through Treasury-bill purchases to maintain ample reserves. It gives no purchase amount and reports no execution.
If needed, the Desk can also buy other Treasury securities with no more than three years remaining to maturity. The note also directs the Desk to roll over all principal payments from Treasury holdings at auction and reinvest all principal payments from agency securities into Treasury bills.
For crypto markets, the distinction is between the chosen interest-rate stance and the operations that maintain it. The October package describes a hold implemented through an ample-reserves system. Transaction results and purchase records would show how the instructions are executed, while separate evidence of crypto demand and transmission would be needed to connect those operations to Bitcoin.
