A former Fed chief lays out his grand solution to stabilize the repo market
have keep interest rates in their intended window, several steps should be taken to further support its new monetary policy toolkit. The central bank's autumn rate spike led many to fear the Fed lost control of money markets. That event should guide the bank in the tough task of adapting to the post-financial-crisis lending environment, Dudley said.
"The spike in the fall was not a 'canary in the coal mine' signaling bigger problems in the financial system," he wrote. "Instead, it reflects the difficulty in forecasting the demand for reserves given the changes in regulations." A standing repo facility would effectively replace the central bank's capital injections and let lenders convert securities into cash reserves whenever they see fit, according to the former Fed chair. An open cash pool would decrease the potential for a last-minute cash shortage, and Dudley isn't the only expert to endorse the idea.
A standing repo facility would "address the potential problem of the Fed providing liquidity to primary dealers but primary dealers not lending the funds to other market participants that might need short-term repo financing," the former bank chief wrote. Rates for repurchase agreements soared to 10% from the 2% intended window on September 17, prompting concern around whether the nation's money markets were far less stable than previously thought.
France Dernières Nouvelles, France Actualités
Similar News:Vous pouvez également lire des articles d'actualité similaires à celui-ci que nous avons collectés auprès d'autres sources d'information.
Fed officials are increasingly warning that climate change could damage the economy | Markets InsiderFederal Reserve officials are signaling fresh concerns about the dangers that extreme weather poses to the economy and to the financial system. ...
Lire la suite »
The Fed Is Creating A Monster BubbleI am a financial writer, publisher, and New York Times bestselling-author. Each week, nearly a million readers around the world receive my Thoughts From the Frontline free investment newsletter. \n\nMy most recent book is Code Red: How to Protect Your Savings from the Coming Crisis. I appear regularly on CNBC and Bloomberg TV. I’m also Chairman of Mauldin Economics, a research group that provides monthly analysis and recommendations to thousands of readers around the world.\n\nI was previously CEO of the American Bureau of Economic Research. Today I am President of the investment advisory firm Millennium Wave Advisors, LLC. I am also president and registered principal of Millennium Wave Securities, LLC a FINRA and SIPC registered broker dealer.\n\nWhen I’m not traveling to speak at conferences and events, I live in Dallas, TX. I’m also the proud father of seven children.
Lire la suite »
Fed faces new trade-offs, hunts for new model, in low-rate worldAn unprecedented combination of low U.S. unemployment, weak inflation and low in...
Lire la suite »
Fed focuses on repo market exit strategy after avoiding year-end crunchWall Street's worst fears of a year-end funding squeeze never materialized ...
Lire la suite »
Ben Bernanke says the Fed shouldn't rule out using negative interest ratesFormer Federal Reserve Chairman Ben Bernanke cited the benefits of at least keeping the option alive to take short-term rates below zero. Doing so, he said, would give the Fed flexibility at a time when its policy toolkit is limited.
Lire la suite »
Fed focuses on repo market exit strategy after avoiding year-end crunchWall Street's worst fears of a year-end funding squeeze never materialized ...
Lire la suite »