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it isn't clear what it means if anything. basically just means banks have way more cash than they know what to do with (due to fed policy), so they are parking
by ffggvv 5y ago
it isn't clear what it means if anything.
basically just means banks have way more cash than they know what to do with (due to fed policy), so they are parking it overnight at the fed for close to zero interest.
the fed introduced this program to prevent interest rates from going below zero. they are essentially a floor on the market. and soaking up excess short term liquidity.
- JumpCrisscross 5y ago> fed introduced this program to prevent interest rates from going below zero FOMC repos and reverse repos predate ZIRP.
- rebelos 5y ago> it isn't clear what it means if anything What it indicates is what the Fed knows and has already signaled: monetary policy is going to be largely ineffectual in the near term.
- JumpCrisscross 5y ago> monetary policy is going to be largely ineffectual in the near term The failure mode you're alluding to is a Keynesian liquidity trap [1], a sibling to stagflation (inflation and demand failure): deflation and demand failure. The American economy shows no failure of aggregate demand. (Quite the opposite.) Inflation expectations are rising. And these reverse repo data shows banks relinquishing liquidity, not hoarding it. More pointedly, this increase resulted from the FOMC increasing reverse repo rates. That's monetary policy causing intended effects. [1] https://en.wikipedia.org/wiki/Liquidity_trap https://en.wikipedia.org/wiki/Liquidity_trap