TechFlow news, October 20 — According to Jinshi Data, in response to the slight strain observed last week in the repo market, the Federal Reserve may consider lowering the interest rate paid on bank reserve balances. Currently, this rate stands 15 basis points above the lower bound of the federal funds target range—4.15%, given the current target range of 4%–4.25%. A 5-basis-point cut would encourage banks to forgo interest on reserves and instead deploy funds into the repo market, thereby helping to stabilize fluctuations in repo rates. Analysts at research firm Wrightson ICAP expect the Fed will eventually implement this adjustment, but they note it may be too soon to make such a move at next week’s October meeting.
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