Two ex-Fed officials (Brian Sack and Joseph.....>

FED: Two ex-Fed officials (Brian Sack and Joseph Gagnon) have suggested 4

changes to the Fed`s operating framework, in a blog on the PIIE`s website:

- 1) Fed should implement a standing fixed-rate repo facility, with

counterparties (incl banks) able to borrow at a rate modestly above IOER.

- 2) Fed should aim for a higher level of reserves "in general". It should avoid

identifying some minimum level of reserves, because that`s impossible to

estimate and likely to change over time. 

- Maintaining a higher reserve buffer "has no meaningful cost". They suggest an

increase in reserves by $250bln over the next 2 quarters via outright Tsy

purchases, then growing balance sheet in line with nominal GDP.

- 3) The FOMC`s directive to the open markets desk should explicitly include

control of the repo rate, and possibly go as far as adopting the repo rate - as

measured by SOFR - as the targeted policy instrument.

- 4) Fed should set both the RRP rate and the IOER at the bottom of the target

range, in order to ensure the bottom end of the range is "strong".