Using new transaction - level data, authors Leonardo Bartolini, Svenja Gudell, Spence Hilton and Krista Schwarz show that trade volume in the federal funds market exhibits large swings over the course of the day while prices remain fairly stable, with rate volatility rising sharply only near the end of the trading day. (newyorkfed.org)
Between them the IOER rate and the implicit ON - RRP rate define the upper and lower limits, respectively, of an effective federal funds rate target «range,» because most of the limited trading that now goes on in the federal funds market consists of overnight lending by GSEs (and the Federal Home Loan Banks especially), which are not eligible for IOER, to ordinary banks, which are. (alt-m.org)
Yet instead of enhancing the Fed's conventional powers of monetary control, the ballooning of the Fed's balance sheet has sapped those powers by making it unnecessary for banks to routinely borrow from one another in the federal funds market to meet their legal reserve requirements. (alt-m.org)