Alternatively, the Bank may opt to increase the repo rate on the expectation that other interest rates would rise as the cost of potential commercial bank funding from the Central Bank goes up. But in both circumstances, if financial institutions have a lot of excess funds on their hands, then interest rates may not rise at all!
1 Consistent with research on the effects of asset purchases, between August, when Chairman Bernanke in a speech first publicly suggested the Federal Reserve might take additional action, and November, when the action was taken, longer-term Treasury rates fell as market participants priced in additional Fed purchases.