Ex-Fed Officials: Fed should target repo rate to reduce market volatility

Two former US Federal Reserve (Fed) officials Brian Sack and Joseph Gagnon wrote in a blog published on Thursday, the Fed needs to use the repo rate to minimize the recent disruptive money market volatility that poses risks to the economy.

Key Quotes (via Reuters):

“Volatility in this market threatens the functioning of markets more broadly and could ultimately hurt the economy.” 

“A better approach is needed.”

“Not opposed to the Fed’s “floor system,” which it uses to set rates by paying interest on bank reserves.”

“The Fed should make changes to create a system that is more resilient and effective.”

The Fed should consider targeting the repo rate when setting policy instead of targeting the fed funds rate.”

The US dollar index rallied in the US last session after the Fed then said it would boost the size of its intervention in the repurchase, or repo, market to $100 billion overnight Thursday from $75 billion, while doubling the size of a two-week offering Thursday to $60 billion, per WSJ. 

The spot now trades back above the 99 handle, testing three-week tops, as markets look past the US political turmoil for the time being.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Feed news

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD loses 1.1800 amid escalaing US-Sino tensions

EUR/USD dips sub-18 after the US reported an increase of 1.763 million jobs in July, better than estimated but pointing to a deceleration. Escalating Sino-American tensions are boosting the dollar and fiscal talks are eyed. 


GBP/USD resumes decline, weighed by UK concerns, US-China conflict

GBP/USD trades at fresh weekly lows below 1.3050 as the dollar got a sudden boost from mounting tensions between the world's two largest economies. UK Chancellor Rishi Sunak said the furlough scheme that is underpinning the economy cannot last forever.


Gold: Meteoric rally falters, closes the week below $2050

Dollar comeback poured cold water on gold’s record-breaking rally. US-China woes, US stimulus deadlock and upbeat NFP boosted the USD. The focus stays on US-China trade talks amid light US docket next week.

Gold News

Bitcoin may extend the recovery once Gold resumes the rally

Gold retreated from the recent highs, but the sentiments are still bullish. Cryptocurrencies resumed the upside, some altcoins are demonstrating strong gains. ETH/BTC stopped the downside correction and settled at $0.03300.

Read more

WTI extends slide toward $41, on track to post weekly gains

Crude oil prices continued to fall on Friday and the barrel of West Texas Intermediate (WTI) touched a daily low of $41.05 before recovering modestly.

Oil News