Our policy team yesterday took a look at the....>

FED: Our policy team yesterday took a look at the Fed's operational framework

and found the following:

-Effective FFR Just 5bp Shy of Upper Bound of FOMC's Target Range

-Declining Excess Reserves Amid Balance Sheet Roll-Off Helps Drive EFFR Higher

-Fed Paper Suggests EFFR Breaches Upper Range When Reserves Fall to $500B-$1.1T

At issue is the workability of the so-called "floor" system in an era of rising

funding pressures, which have narrowed the gap between the effective fed funds

rate and the upper bound of Fed's target range from 9 basis points last year to

just 5 this week. Ongoing balance sheet reduction will likely drive the supply

of bank reserves lower still, potentially pushing the funds rate outside the

25-basis-point range.