how does the fed set interest rates 
the federal reserve sets the rate for its overnight reverse repurchase on rrep agreement facility where it buys and sells securities this rate helps set the bottom number for the rate range it also pays interest on reserve balances iorb the rate of which helps set the top number for the range the fed also uses the rate at its discount window and open market operations to help establish interest rates that it believes will influence the economy to produce an average inflation rate of 2 over the long run 21