The Reverse Repo Facility (RRP) is a Federal Reserve tool that allows eligible financial institutions to park cash at the Fed overnight in exchange for Treasury securities. Money sitting in the RRP is removed from the broader financial system.
At peak usage in late 2022, the RRP held over $2.5 trillion. Starting in mid-2023, money market funds shifted cash from the RRP into Treasury bills, draining the facility to under $200 billion by late 2025. Each dollar leaving the RRP re-entered the financial system.
The RRP is a key component of the net liquidity calculation: Net Liquidity = Fed Balance Sheet - RRP - TGA.