Fed's Logan calls for Fed to modernize interest rate target system
Federal Reserve (Fed) Bank of Dallas President Lorie Logan stated on Thursday that the Fed needs to modernize how it approaches setting interest rates, acknowledging that the central bank may need to allow for more volatility in the underlying repo rate and noted that the Fed has overhauled its rate-setting schemes in the past.
Key highlights
Fed should move to target tri-party general collateral rate.
Time has arrived for Fed to modernize interest rate target system.
Repo market is center of money markets, makes sense to target.
Modernizing rate control system is technical in nature.
Best to update rate control system when markets are calm.
Some volatility in repo rate target would be fine given Fed targets range.
Fed has changed rate control system a number of times in past.
Shift to secured markets means fed needs to update rate target system.
Fed funds market still works but is increasingly fragile.
Doesn’t believe fed should use administered targets for new system.
Author
Joshua Gibson
FXStreet
Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.
