Lorie Logan on Monetary Policy Operations, the Fed’s New Standing Repo Facility, and the Future of the Fed’s Balance Sheet
Macro Musings with David Beckworth
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Standing Repo Facility
Larry logan: Standing repo facility could affect how many reserves are demanded by the banks. He says that in most economies, interest on reserve balances would be enough to control interest rads. But because of lending policies such as asset purchases, lenders can end up with more reserves than their comfortable holding. During these times, they lower the rates at which they take deposits, and the rates trade below i o r b. In order to enhance rate control, the overnight reverse repo facility was established - this does place a floor under overnight rates. Larry logan: I think my main observation would just be that both ir b and overnight r p are important components to the floor.
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