NEW YORK (Reuters) - The Federal Reserve on Thursday awarded $105.2 billion of overnight fixed-rate reverse repurchase agreements to 49 bidders at an interest rate of 0.25 percent, the New York Fed said on its website.
This was the first reverse repo award after the U.S. central bank on Wednesday raised its interest rate target range to 0.25 to 0.50 percent from zero to 0.25 percent.
The reverse repurchase program (RRP) is seen as a critical policy tool for the Fed to drain money from the financial system in an effort to help achieve its interest rate objectives.
The RRP rate is the “floor” rate for the Fed’s rate corridor, and the interest rate it pays banks on excess reserves (IOER) acts as the “ceiling” rate, which was increased to 0.50 percent.
On Wednesday, the Fed allotted $102.0 billion in one-day reverse repos to 46 bidders, including Wall Street dealers, money market mutual funds and mortgage finance agencies, also at an interest rate of 0.05 percent.
Reporting by Richard Leong and Jonathan Spicer; Editing by Chizu Nomiyama