The Federal Reserve is widely expected on Wednesday to lift the interest rates that influence its fed funds target, a technical move that could keep interbank lending running smoothly and help prevent financial market disruption should the benchmark rate fall below zero.
FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid
“The markets are nervous that the effective fed funds rate goes negative. I don’t think it will happen,” said Gennadiy Goldberg, senior rates strategist at TD Securities in New York. Fed officials have said they oppose negative rates for the United States. They have had mixed results overseas and were once considered only for economies with chronically low inflation such as Europe and Japan.
The RRP is also the rate the Fed pays non-bank institutions which leave cash at the Fed collateralized with Treasuries. The last time the Fed raised the IOER was during the January meeting, lifting that rate to 1.6% from 1.55%.
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