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Lou Crandall & Joseph Wang: A Monetary Plumbing Masterclass

Forward Guidance

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How to Reduce the Limits of the RRP Facility

There are people who want to get rid of make sure the RRP is a bit smaller. They propose two potential ways of doing it, one as alluded to is reducing the counterparty limits to the RRP. If you were putting 60 billion in, now you can only do 30 billion. That means that you likely have to accept returns that are below the RRP floor and jeopardizes the Fed's ability to control interest rates.

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