MNI BRIEF: Powell Asks Fed's Staff for Standing Repo Proposal

Federal Reserve Chair Jerome Powell has tasked central bank staffers with working on a specific proposal for a standing repo facility, according to the minutes of the June FOMC meeting.

The minutes of the meeting showed staff presented potential design considerations of a standing repo facility that "participants broadly supported," such as setting the minimum bid rate at the top of the fed funds rate range at 25 basis points, including primary dealers as counterparties which could be extended over time to include banks that expressed interest in participation, and possibly limiting eligible collateral to only U.S. Treasuries. Fed officials also furthered discussion of making a standing FIMA repo facility.

A "substantial majority" of Fed officials restated their view, conveyed at the April 2021 meeting, that the potential benefits of a standing repo facility outweighed the potential costs. MNI has reported a standing repo facility would be meant primarily as a backstop with rates set not so high as to be punitive and stigmatizing usage.