Definitions for "Repurchase Agreements"
Keywords:  repo, dealer, reserves, inject, rp
When the Federal Reserve makes a repurchase agreement with a government securities dealer, it buys a security for immediate delivery with an agreement to sell the security back at the same price by a specific date (usually within 15 days) and receives interest at a specific rate. This arrangement allows the Federal Reserve to inject reserves into the banking system on a temporary basis to meet a temporary need and to withdraw these reserves as soon as that need has passed.
An investment agreement involving the purchase of a security and a simultaneous agreement (generally with a bank or broker dealer) to repurchase that security at a specified price and date. Repurchase agreements are used as a way to earn income on idle cash.
When the central bank buys or sells a security to a government securities dealer with the promise to sell it back or repurchase it a short while later. This act has the effect of injecting or removing reserves from the banking system in order to meet central bank strategies for implementing monetary policy.