Given the large size of the Federal Reserve's balance sheet, the FOMC is employing new tools to implement monetary policy. In particular, to raise the federal funds rate we increased the interest rate we pay on reserve balances that depository institutions hold at the Federal Reserve.
We also employed an overnight reverse repurchase facility, through which we interact with a broad range of firms to help provide a soft floor for the federal funds rate consistent with our target range. 2 These new tools have worked well, and the federal funds rate and other short-term interest rates have increased slightly, as expected.