Latest / The Federal Reserve Podcast with Fexingo: Interest Rates, FOMC Meetings, and Monetary Policy
How the Fed Balance Sheet Runoff Is Hitting Bank Reserves
Episode 130 digs into a quietly critical mechanism of Fed policy: the ongoing runoff of the central bank's balance sheet, known as quantitative tightening. With the Fed funds rate flat at 3.63% and interest on reserve balances steady at 3.65%, the focus has shifted from rate cuts to the shrinking pool of bank reserves. Lucas and Luna explain how the Fed's reverse repo facility has nearly drained, why reserves are starting to feel the pinch, and what the 'floor system' means for the plumbing of monetary policy. They discuss the irony that despite inflation cooling — CPI…
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