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Liquidity: Difference between revisions
→Reverse Repo
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Its important to monitor it, because if the FED decided to lower the interest rate it pays, this could cause the reverse repo to drain since investors could decide to look for other assets for return. This could inject a lot of liquidity to bank reserves and markets. <ref>https://www.reuters.com/markets/us/sooner-or-later-fed-may-need-technical-tweaks-rate-control-toolkit-2023-02-01/</ref> | Its important to monitor it, because if the FED decided to lower the interest rate it pays, this could cause the reverse repo to drain since investors could decide to look for other assets for return. This could inject a lot of liquidity to bank reserves and markets. <ref>https://www.reuters.com/markets/us/sooner-or-later-fed-may-need-technical-tweaks-rate-control-toolkit-2023-02-01/</ref> | ||
*The reserve repo has been stable at about | *The reserve repo has been stable at about 2 trillion dollars since last year. <ref>https://www.newyorkfed.org/markets/desk-operations/reverse-repo</ref> | ||
*Recently, has been drained by about 200 billion, this could help explain the stabilization of bank reserves and the easing of financial conditions in recent months. If the current appetite for more risky assest continue, the draning of the RRP could also continue in coming months. | *Recently, has been drained by about 200 billion, this could help explain the stabilization of bank reserves and the easing of financial conditions in recent months. If the current appetite for more risky assest continue, the draning of the RRP could also continue in coming months. | ||