Feb
08
Credit Suisse: The Fed Needs to Talk About How Foreign Banks Are Helping It Raise Rates
ByForeign central banks are playing a larger role in the Federal Reserve’s plan to increase interest rates, largely at the expense of domestic money funds.
What drains liquidity, has never been mentioned by a Federal Reserve official, and is growing fast?
The U.S. central bank’s foreign overnight reverse repurchase agreements (RRPs), of course!
While much of the focus has been on the RRPs the Fed is undertaking with U.S. banks and money market funds in order to reverse years of easy monetary policy and raise benchmark interest rates, less attention has been paid to a similar program offered to foreign central banks. A new paper by Zoltan Pozsar, analyst at Credit Suisse Group AG, sheds light on the extent to which foreign central banks have been tapping the facility, largely at the expense of money funds…
Credit Suisse: The Fed Needs to Talk About How Foreign Banks Are Helping It Raise Rates
