
← Monetary Policy Explained with Fexingo: Central Banks, Money Supply, and Interest Rates5 Oct · 8 min
How Central Banks Use Repo Markets To Steer Rates
We break down the repurchase agreement, or repo market, which acts as the central nervous system for short-term liquidity. Lucas explains why this $6 trillion daily trading floor matters more than headlines suggest, while Luna highlights how a small glitch in September 2019 nearly froze global finance. We explore the mechanics of overnight lending between banks and non-bank entities, revealing why central banks must intervene to keep the gears turning. This episode covers the specific role of primary dealers, the cost of borrowing cash against collateral, and why understanding repos is key to understanding modern monetary policy. You will learn how interest rates are actually set on the ground level, not just announced from a podium.
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