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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
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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
Topics:
Mike Norman considers the following as important:
This could be interesting, too:
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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....
A Return to Operating with Abundant Reserves
December 01, 2020
Lorie K. Logan, Executive Vice President