Barclays: If repo rates remain elevated, the Federal Reserve may need to intervene
Jinse Finance reported that if the repo agreement rate returns to above the effective federal funds rate target range, or even just to its upper bound and remains there for several weeks, policymakers may need to make adjustments, according to Barclays strategist Samuel Earl in a report. Earl wrote that the repo market is an "important driver" of the federal funds rate trend, and officials need to be concerned if repo rates remain at or even above the upper limit of the range. This means that the Federal Reserve will eventually need to increase reserves by lending more through repos or directly purchasing Treasury bills.
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