New York Fed met with Wall Street firms about key lending facility: FT
News Summary
New York Federal Reserve President John Williams met last week with Wall Street's primary dealers to discuss the Fed's standing repo facility. The meeting took place on the sidelines of the Fed's annual Treasury market conference and included representatives from many of the 25 primary banks that underwrite government debt. Williams sought feedback from these dealers on the use of the Fed's Standing Repo Facility (SRF), a permanent lending tool that allows eligible financial institutions to borrow cash from the central bank in return for high-quality collateral such as Treasury bonds, effectively acting as a market backstop. The meeting occurred amidst brewing concerns about stress in parts of the U.S. financial system and signs of tighter market liquidity. Roberto Perli, who manages the Fed's System Open Market Account, stated that firms in need of the SRF should use it
Background
The Standing Repo Facility (SRF) is a permanent monetary policy tool established by the Federal Reserve in 2021, designed to serve as a backstop for money markets and ensure the federal funds rate remains within its target range. It allows eligible financial institutions, primarily banks and primary dealers, to borrow overnight cash from the Fed against high-quality collateral like Treasury bonds. This tool was introduced in response to repo market volatility seen in 2019, when short-term borrowing costs spiked, prompting temporary Fed interventions. In 2025, with signs of stress in parts of the U.S. financial system and tightening market liquidity, the Fed may be re-evaluating the SRF's effectiveness and utilization strategy.
In-Depth AI Insights
What is the true intention behind the New York Fed convening Wall Street primary dealers to discuss the SRF? - This is more than a routine engagement. Amidst current signs of potential stress and tightening liquidity in the U.S. financial system, this meeting suggests the Fed might be preparing for broader or more frequent utilization of the SRF. - Seeking