Economics
Fed's Unexpected Partner to Manage Rates: Foreign Central Banks
- Overseas central banks biggest players in reverse repo market
- Strong foreign demand making it easier to hold Fed rate floor
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The Federal Reserve’s efforts to ensure its interest rate increase filters through to the broader U.S. economy have found an unexpected counterparty: foreign central banks.
The Fed borrows billions of dollars daily to put a floor under its benchmark policy rate and this business has become dominated by overseas monetary authorities, instead of the U.S.-based money-market mutual funds who had been expected to be the biggest players.