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Lowering The O/N RRP Rate Not Something The FOMC Are Considering

FED
  • Q: What are you looking for to judge whether we're approaching reserve scarcity, is Treasury issuance going to affect that? Are you considering lowering the ON RRP rate?
    • A: Treasury has laid out its borrowing plans publicly, Yellen commented yesterday to the effect that Treasury has consulted widely with market participants about how to avoid market disruption.
    • The refilling of the TGA is very likely to involve both a reduction in the RRP facility and also in reserves. It's really hard to say which will be greater. We're starting at a very high level of reserves and RRP takeup. So we don't think reserves are likely to become scarce in the near term or even over the course of the year.
    • The RRP doesn't look like it's pulling money out of the banking system, it's been shrinking lately. So that's not something [lowering the ON RRP rate] we would do. I think it's a tool that we have. If we want to use it, we can. There are other tools we can use to address money market issues, but I wouldn't say that that's something that's likely that we would do in the near term.
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