The repo rate also known as Repurchase Agreement is the rate at which the banks borrow from the Central Bank. It becomes typical for the banks to borrow from the central bank if there is an increase in the repo rate. Generally used to control the amount of money in the market, repo rate is usually a short-term measure which is used for short-term loans.
The Federal Open Market Committee adds reserves
to the banking system and withdraws them after a specified period of time. So,
reverse repo drains reserves initially and adds them back later. Hence, it can
be used as a tool for stabilizing interest rates with the Federal Reserve using
it in the past to adjust the Federal funds rate to match the target rate.