Bill Nelson on the Fed’s Operating System, Standing Repo Facility Stigma, and the Future of the Central Bank’s Balance Sheet
Macro Musings with David Beckworth
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Is There a Long Flat in Interest Rates?
When the provides, you know, two trillion dollars in reserve balances, mean markets, they don't have any choice in the matter. Once that happens, if you drop below two trillion dollars, rates will go so there's always this upward movement. A banker, chief investment officer at one of the largest banks, gave me an example that i like to use to explain how this works. You can be in compliance with all the regulations by holding three days worth of cash for your emergency ation. But when reserve balances were cheap, meaning market rates were below the rate that the fed was paying on reserves, they decided they would hold five days worth of catch rather than alternative types of liquid assets
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