Fed Signals It’s Ready to Wield Power Over Short-Term Rates (Wizard Of Rates??)

by confoundedinterest17

Gee, I thought The Fed already had control over short-term rates.

Federal Reserve Chairman Jerome Powell stands ready to pull some of the central bank’s policy levers in between regularly scheduled meetings, if that’s what it takes to keep short-term interest rates under control.

He noted recent downward pressure on rates during the Federal Open Market Committee’s March 16-17 meeting, according to minutes released Wednesday, and said it might be appropriate adjust the interest on excess reserves rate (known as IOER), the amount the Fed pays on its facility for overnight reverse repurchase agreements or both. Action could come at a regular meeting or between them to keep the fed funds rate, the central bank’s main policy benchmark, “well within” 0% to 0.25%, he said.

Repo and Treasury bill rates have been flirting with zero — and even trading below sometimes — since the beginning of the year as reserve balances at the central bank swell. Market participants have told the Fed that a rapid expansion in reserves could keep driving money-market rates lower, with the earliest and most pronounced moves in the overnight secured funding markets.

It seems like Powell and the FOMC have pretty good control over short-term interest rates already.

Repo rates are also under control, too bad money printing isn’t.

Powell doesn’t have much control over the 10-year Treasury Notes or 30-year Mortgage rate.

Pay no attention to that man behind the curtains.

 

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