Wall Street Is Perplexed by Fed’s Motivation to Tweak Key Tool
- Officials hinted at lowering rate on reverse repo facility
- Counterparties parked $175 billion at central bank on Tuesday
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The Federal Reserve is seen likely to lower the rate on one of its tools to help control the main policy benchmark, though some on Wall Street are skeptical about the motivation behind the move.
A plurality of strategists expect the Fed to lower the offering rate on its overnight reverse repo facility, or RRP, by 5 basis points, potentially as soon as next week when officials are widely expected to cut their benchmark by a quarter of a percentage point. The current RRP rate is 4.55%, which is five basis points above the bottom of the Fed’s policy target range of 4.5% to 4.75%.