Central banks execute monetary policy by altering the volume of reserves available to the commercial banking sector. This operational implementation has shifted from traditional Scarcity Frameworks to modern Abundance Frameworks. [1]

Historically, central banks kept system-wide reserves scarce. They adjusted the volume of open market operations daily to match demand, steering short-term interbank lending rates within a tight corridor framed by standing facilities. [1, 2]

Following large-scale asset purchase programs, central banks shifted to an abundance framework, flooding the banking network with excess liquidity:

[System Flooded with Excess Reserves] ---> Interbank Trading Activity Drops ---> Short-Term Rates Settle on the Deposit Floor Rate

Under this model, short-term money market rates settle directly on the interest rate paid on central bank deposits. This floor architecture allows policy committees to adjust interest rates without needing to alter daily reserve volumes. [1, 2]