Fed Still Considering Money Fund Repos to Scale Back Stimulus

The Federal Reserve is still considering selling reserve repos to money market funds to reverse course and pull back some of the $2 trillion in stimulus money it pumped into the money supply, and has begun testing various methods. However, it has not yet decided when to begin taking these measures, as well as to increase interest rates.

“This work is a matter of prudent advance planning by the Federal Reserve, and no inference should be drawn about the timing of monetary policy tightening,” the New York Fed said, adding that it has not yet decided to expand its reverse repo sales beyond prime brokers to money funds.