The Fed’s rate freeze will mean nothing unless banks fix a repo market bottleneck
Summary
The Federal Reserve kept its federal funds target at 3.75%-4% on Oct. 28 in a 10-2 vote; two members preferred a quarter-point increase. The next day’s implementation instructions maintained the key administered rates: 3.9% on reserve balances, 4% for standing overnight repo and 3.75% for reverse repo, subject to a $160 billion daily counterparty limit. The New York Fed’s Desk may buy Treasury bills, or short-dated Treasury securities if needed, to maintain ample reserves. It will also roll over Treasury principal payments and reinvest agency-security payments in Treasury bills. These operations implement the Fed’s rate stance; the instructions alone provide no evidence of a connection to Bitcoin demand or crypto-market effects.
