Fed Target Range Floor

Think of it this way

It is the minimum speed limit. Together with the ceiling it marks the permitted lane, but it does not tell you anything about actual traffic either.

What is Fed Target Range Floor?

It is the lower limit of the interest rate range the Federal Reserve sets at each FOMC meeting.

How to read Fed Target Range Floor

A stepped line, paired with the ceiling. Together they draw the corridor within which EFFR should move. Lag: none; a rate is priced in on the same day.

What Fed Target Range Floor means for the market

Same as the ceiling: it is monetary policy context, not a measure of liquidity.

Where the money flows

It does not move money on its own either, but the floor is held up by something that does: the interest the Fed pays banks on their reserves. Example: if the Fed pays a bank 4% to leave its money idle, that bank is not going to lend it to another at 3.5%. That calculation is what keeps market rates from falling below the floor.

What to watch in Fed Target Range Floor

Same as the ceiling, but from below: what you watch is that the effective rate does not sink toward the floor. If it did, it would mean there is so much surplus money that nobody can find a place to put it, which is exactly what happened between 2021 and 2022 with the RRP overflowing.

A monetary policy reference. It does not move liquidity on its own.