U.S. Federal Reserve Chairman Jerome Powell speaks during the "The Economic Outlook and Monetary Policy" panel discussion hosted by the Swiss Institute of International Studies at the University of Zurich in Zurich, Switzerland September 6, 2019.
Arnd Wiegmann | Reuters
Federal Reserve officials are continuing to look at ways to make sure funding pressures in the overnight lending market don't cause a problem again.
At their October 29-30 meeting, Federal Open Market Committee members weighed several options ahead for keeping the repo market stable and maintaining the central bank's key lending rate within its target range.
The discussions came about a month and a half after funding pressures sent repo rates soaring and the fed funds rate briefly above its target range. The repo market is considered the plumbing of the U.S. financial system as it is the place where banks go for the overnight loans they use to fund operations.
The minutes noted that Fed officials also met by videoconference on Oct. 10 to discuss a strategy.
One option that received considerable discussion was a so-called standing repo facility – essentially a mechanism where the Fed will step in whenever needed to supply banks with reserves in exchange for ultra-safe collateral like Treasury debt.
The standing repo idea is a popular one on Wall Street[1]. But policymakers said they are not yet ready to make any decisions, instead deciding to continue to watch how market operations instituted since the September problems are working.
A standing repo "would likely provide substantial assurance of control over the federal funds rate, but use of the facility could become stigmatized, particularly if the rate was set at a relatively high level,"...