Fed Should Stop Paring Bond Holdings Before Repo Facility Is Empty, Wrightson Says
- Usage of daily reverse repo operation is around $1 trillion
- Crandall says Fed should encourage ‘deep liquidity buffers’
The Federal Reserve building in Washington, DC.
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The Federal Reserve should stop cutting its bond holdings before a key liquidity facility is completely emptied so it can ensure that banks have sufficient reserves, according to Wrightson ICAP.
There’s uncertainty surrounding the level of reserves that the banking system needs before they become scarce and institutions rely more heavily on short-term funding markets.