###POV: 5 REASONS NOT TO EXPECT AN IOER CUT.....>

FED: ###POV: 5 REASONS NOT TO EXPECT AN IOER CUT WEDNESDAY: 

- 1) Seasonality. Temporary factors appear to be at play in boosting effective

Fed funds above IOER, including tax collections pulling cash out of the system.

There appears to be broad consensus that this should reverse.

- 2) Not close enough to act. The previous two times the Fed lowered IOER, EFFR

was within 5bps of the upper funds target band. It is now 6bps below.

- 3) Mixed signalling. Previous reductions in IOER relative to the upper Fed

funds band have been made alongside Fed hikes, thus making it easier to

communicate that it was a technical rather than  a monetary policy move. That is

not the case this time.

- 4) No signalling. The Fed has done little to suggest in advance that it would

act on IOER at this meeting - which would be at odds with previous adjustments.

- 5) SOMA runoff ending. True, the Fed`s assessment is that bank reserves remain

ample (NY Fed's Senior VP Lorie Logan, who heads the bank's Open Market Trading

Desk, expressed that assessment on April 17). But for any FOMC members concerned

about reserves, the end of QT in Sept could assuage some fears.