--Higher Supply Could Put Downward Pressure on Fed Funds Rate
--But Find FFR Drops Out of Range Only in 'Extreme Conditions'
--Rosengren Says ON RRP May Need Tinkering, But Confident It Will Work
WASHINGTON (MNI) - While new research from the Federal Reserve Bank of
Philadelphia finds the tools the Fed plans to use to raise the fed funds are
likely adequate, it raises questions about a cap set on the overnight reverse
The research, published online Friday, finds that when taken together, the
interest on excess reserves and the ON RRP facility "can be used to keep rates
in the target range, which appears to be a top priority."
An ON RRP facility without limitations on volume "would provide an
effective floor for interest rates and assist pol