Tuesday , November 5 2024

Fedspeak

Summary:
What does she mean here by the figurative  “pressure”?  Can one of you Art Degree people help figure it out?   Throw me a bone here... "As shown in Figure 9, IOER is currently set at 10 basis points, well below the top of the target range. If undue downward pressure on rates were to emerge, the Federal Reserve could adjust IOER higher to lift overnight rates. Even if this downward pressure persisted, the ON RRP would maintain a strong floor by providing an alternative investment for money market participants and, if needed, by reducing the quantity of reserves held by the banking system to relieve pressure on bank balance sheets.”I’m reading that sentence over and over....  to me it can read like she thinks “banks lend the reserves!” and by offering an alternative reverse repo facility it

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What does she mean here by the figurative  “pressure”?  Can one of you Art Degree people help figure it out?   Throw me a bone here...

"As shown in Figure 9, IOER is currently set at 10 basis points, well below the top of the target range. If undue downward pressure on rates were to emerge, the Federal Reserve could adjust IOER higher to lift overnight rates. Even if this downward pressure persisted, the ON RRP would maintain a strong floor by providing an alternative investment for money market participants and, if needed, by reducing the quantity of reserves held by the banking system to relieve pressure on bank balance sheets.”


I’m reading that sentence over and over....  to me it can read like she thinks “banks lend the reserves!” and by offering an alternative reverse repo facility it can remove “pressure” for banks to “lend the reserves” at lower rates...  or I guess maybe not....


Mike Norman
Mike Norman is an economist and veteran trader whose career has spanned over 30 years on Wall Street. He is a former member and trader on the CME, NYMEX, COMEX and NYFE and he managed money for one of the largest hedge funds and ran a prop trading desk for Credit Suisse.

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