BIS Review 116/2007  3  The Federal Reserve's initial action was to increase liquidity in short-term money markets through larger open market operations – the standard means by which it seeks to ensure that the federal funds rate stays at or near the target rate set by the Federal Open Market Committee (FOMC). A number of other central banks took similar steps.
One source of pressure in the overnight market was the demand for dollar funding by European banks to which I alluded earlier. As Europe is in the latter part of its trading day when U.S. markets open, this extra demand for dollars at times led the federal funds rate to open well above the target.