Economics
The Fed Is Entrenched in the Repo Market. How Does It Get Out?
- The central bank has plans to keep intervening into 2020
- Participants want answers from Fed about long-term plans
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At the Federal Reserve, 2020 will be all about making the repo market boring again. Policy makers will find this easier said than done.
The central bank’s liquidity injections -- including almost half a trillion dollars earmarked to ensure New Year’s Eve is a snooze -- and Treasury bill purchases have nudged the vital market for repurchase agreements back toward normalcy after a funding crunch sent rates soaring in September. This has anchored the Fed’s benchmark rate firmly within policy makers’ preferred range of 1.50% to 1.75% and caused T-bill yields to fall.