We also use per-counterparty caps, and can use an aggregate cap. Evidence to date on control Now, let’s discuss what the data tell us about how well the framework performed. The distribution of traded rates in the federal funds market, shown in Figure 1, essentially made a parallel shift higher after liftoff. These data are drawn from the new FR 2420 data collection I discussed earlier, and they show an average over all days from liftoff to this past Wednesday, leaving out December 31. Nearly all trading occurred within the new range – it’s normal for there to be a little bit above the range – suggesting that our framework was broadly effective in moving traded rates upward. Because traded rates moved upward in this way, we have so far achieved an excellent level of control over the federal funds rate. Since December 17, the day after the FOMC meeting, the effective federal funds rate, calculated under its current methodology as a volume-weighted mean, has traded within the FOMC’s new 25-to-50-basis-point range on all but one day, which I’ll come back to. This is shown in Figure 2. The rate has averaged around 36 basis points, about 25 basis points above its average level over the analogous year-ago period, when the target range was zero to 25 basis points. Let’s consider the calculation of the effective rate for a moment.
Accordingly, the interest rate on the pool was slightly below overnight Treasury repo rates in the market.47 To ease the Desk’s job in the daily forecasting of autonomous factors, tight limits were imposed on customers’ ability to rapidly vary the size of their investment in the pool. Since the crisis, the New York Fed has continued to provide the pool as a service. Investments in the pool continue to be paid the market-based rate I mentioned. Figure 16 contains some statistics on this rate relative to a measure of the broad market rate. We do not use the foreign pool as a means for implementing monetary policy, and the change in the composition of Federal Reserve liabilities it can generate has little to no impact in unsecured markets because of the large amount of reserves in the system. Recall that the current operating framework is not based on reserves scarcity. Use of the foreign pool has grown over the last year and a half, from a bit under $ billion in mid-2014 to about $ billion on February 17. This growth isn’t associated with liftoff, and it isn’t because we have changed the way in which the interest rate is calculated.