Banking Bucks

To keep very short-term interest rates above zero, the Fed recently boosted the rate it pays banks to lend money back to the Fed (you read correctly) overnight from zero to a whopping 0.05%. The first day after the increase, $750 billion flowed into the “high-yielding” reverse repurchase facility. Could this mountain of sideline liquidity doing nothing be destabilizing if it quickly flows somewhere, or is it largely benign? Unknown.

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