The post Wall Street questions Fed’s intentions as tool rate cut appears likely appeared on BitcoinEthereumNews.com.

Wall Street is buzzing as the Federal Reserve prepares to tweak its overnight reverse repo (RRP) facility rate, a move expected to drop it by 5 basis points. This seemingly small adjustment, rumored to come next week, could move billions in cash flows and stir up money markets. Traders and analysts are asking the same question: What’s the Fed really up to? The RRP rate, now sitting at 4.55%, is five basis points above the lower limit of the central bank’s policy target range of 4.5% to 4.75%. While the Fed labels this adjustment as “technical,” skeptics aren’t buying it. With balances at the RRP facility already down $2.4 trillion from their December 2022 peak, the timing feels off. Why make a change now when usage has plateaued at roughly $175 billion? Liquidity, or just optics? The Federal Reserve has been chipping away at excess liquidity since it began quantitative tightening. The RRP facility, which acts as a sponge for extra cash in the system, has seen massive outflows over the past year. But some experts say this isn’t about liquidity at all. Barclays says the adjustment is purely technical, meant to align the RRP rate with the lower end of the federal funds target range. In other words, it’s housekeeping. Yet firms like Bank of America and Citigroup are scratching their heads, questioning the logic. Mark Cabana of Bank of America called the timing “perplexing,” noting that the adjustment would lower repo and Treasury bill rates, but not much else. Jason Williams at Citigroup shares the confusion. “The market isn’t signaling an urgent need for this move,” he said. “If it were, the futures curve would show it, and that’s not happening.” The Fed hasn’t touched the RRP rate since June 2021, when a dollar surplus pushed short-term funding…

---

Filed under: News - @ December 14, 2024 6:13 pm