Latest / Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates
How Central Banks Are Using the Reverse Repo Facility
Episode 83 of Monetary Policy Explained dives into the Federal Reserve's overnight reverse repurchase agreement facility (ON RRP). Lucas and Luna unpack how this tool works—like a parking lot for money market funds—and why its rapid decline from $2.5 trillion in 2024 to under $100 billion by mid-2026 signals a fundamental shift in banking system liquidity. They explore the mechanics: the Fed sells a Treasury to a counterparty with an agreement to buy it back the next day at a small spread. The real-world stakes? When the RRP drains, reserves build up in the banking system, which can put…
The skinny
The skinny isn't ready yet — notes appear once the transcript is processed.