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Detailed Explanation of the Federal Reserve's Repo Program (SRF)
1. Basic concepts and operational mechanisms
**Standing Repo Facility (SRF)** is a key monetary policy tool established by the Federal Reserve in July 2021, aimed at providing a liquidity "safety net" for the money market to prevent short-term interest rates from soaring above the target range.
Core operation mechanism:
- The Federal Reserve purchases securities (Treasuries, agency debt, or MBS) from eligible counterparties, simultaneously agreeing to sell them back the next day at a slightly higher price
- Essentially provides collateralized short-term loans, temporarily increasing reserves in the banking system
- Transaction period: mainly overnight, but can be extended based on weekends/holidays
**Standing Repo Facility (SRF)** is a key monetary policy tool established by the Federal Reserve in July 2021, aimed at providing a liquidity "safety net" for the money market to prevent short-term interest rates from soaring above the target range.
Core operation mechanism:
- The Federal Reserve purchases securities (Treasuries, agency debt, or MBS) from eligible counterparties, simultaneously agreeing to sell them back the next day at a slightly higher price
- Essentially provides collateralized short-term loans, temporarily increasing reserves in the banking system
- Transaction period: mainly overnight, but can be extended based on weekends/holidays
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