US banks' profits from Federal Reserve interest rates

Version 0.31 (2024-09-22 22:49:44.582000)

updates: Added information on banks' profits and interest rates

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Version 0.3 (2024-09-13 23:37:41.978000)

updates: Record highs in savings and investment instruments

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Version 0.29 (2024-08-14 11:06:31.967000)

updates: Information about the ranking of central banks by assets

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Version 0.28 (2024-04-19 00:20:24.133000)

updates: The amount of reserves in the US banking system experienced its largest drop in two years as Americans paid their income tax bills.

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Version 0.27 (2024-04-16 00:20:16.063000)

updates: Federal Reserve's reverse repo facility experiences sharp drop in inflows

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Version 0.26 (2024-04-11 03:18:01.250000)

updates: US Federal Reserve plans to slow balance sheet runoff

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Version 0.25 (2024-03-28 10:21:44.404000)

updates: The Federal Reserve is close to achieving a rare soft landing for the U.S. economy, but now faces the challenge of reducing cash in the financial system without disrupting markets. Fed Chair Jerome Powell said policymakers are watching various indicators in money markets to determine when to slow the pace of quantitative tightening (QT). The Fed's focus is comforting Wall Street, but the task is difficult as it tries to go from 'abundant' to 'ample' reserves without making them scarce. The indicators the Fed is likely watching include bank reserves, key interest rates in money markets, and cash parked in the Fed's overnight reverse repurchase agreement facility. The Fed is also monitoring the Fed's reverse repo facility, which has been reducing but at a slower pace in recent weeks. Views diverge on when it might completely drain and what it says about liquidity in the system. The Fed is also watching two money market rates - the Fed funds rate and the benchmark Secured Overnight Financing Rate (SOFR) - in relation to the interest on reserve balances (IORB) that the Fed pays to banks. The Fed is likely to want the Fed funds rate to be about 10 basis points higher than it is now, leaving it 2-3 basis points above the IORB. On SOFR, the rate would need to go up 10-15 basis points higher, leaving it 0-5 basis points above what the Fed pays banks. The rate would gradually rise as reserves fall, but supply-demand imbalances could cause brief rate spikes. The Fed will be looking at both the rate and the volatility associated with it to determine when to stop QT.

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Version 0.24 (2024-03-28 07:18:00.456000)

updates: The new information provides additional details on the indicators the Fed is monitoring and the challenges it faces in achieving a soft landing. It also includes market participants' expectations of tapering in May and the importance of getting the drawdown of reserves right to avoid disruptions in Treasury markets. The distribution of reserves across banks and the monitoring of the reverse repo facility are also highlighted. [9cf765bb] [98fd218d]

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Version 0.23 (2024-03-28 06:18:20.923000)

updates: New information on the Fed's focus and challenges in achieving a soft landing

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Version 0.22 (2024-03-28 05:18:05.870000)

updates: Federal Reserve aims for a soft landing by reducing cash reserves

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Version 0.21 (2024-03-12 12:30:53.904000)

updates: Federal Reserve's Emergency Bank-Funding Program Begins to Wind Down

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Version 0.2 (2024-03-06 14:20:32.601000)

updates: Discussion of potential liquidity problems and the declining Reverse Repurchase Program (RRP)

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Version 0.19 (2024-03-05 07:20:18.851000)

updates: Added information about the debate among Federal Reserve officials on the pace, end date, and composition of Quantitative Tightening (QT)

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Version 0.18 (2024-03-01 16:23:48.666000)

updates: Dallas Fed's Lorie Logan emphasizes slowing balance sheet runoff

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Version 0.17 (2024-02-27 06:27:17.307000)

updates: Integration of information about the decline in participation in the reverse repo program and its potential impact on Treasury markets

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Version 0.16 (2024-02-11 07:27:54.742000)

updates: Integrates information about the importance of quantitative tightening and the Fed's goal of sustaining economic growth without reigniting inflation

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Version 0.15 (2024-02-01 00:32:56.570000)

updates: US Federal Reserve plans 'in-depth' talks on balance sheet run-off in March

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Version 0.14 (2024-01-24 15:02:22.805000)

updates: The Bank of Canada's quantitative tightening program may end sooner than expected due to a shortage of cash in the financial system. The central bank injected C$5 billion of liquidity into the market through its overnight repo operations after the CORRA rate traded above the bank's target for the overnight rate. Ending or reducing the pace of quantitative tightening could have several effects, including lower borrowing costs, a weaker Canadian dollar, and limitations on the bank's ability to grow its balance sheet. Settlement balances have already fallen significantly under the quantitative tightening program, and some analysts expect the bank to increase its bond purchases if the program ends.

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Version 0.13 (2024-01-06 22:18:03.921000)

updates: Fed indicates it may slow down or halt balance sheet reduction

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Version 0.12 (2024-01-05 03:21:50.595000)

updates: Wall Street banks expect Fed to delay end of balance sheet drawdown

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Version 0.11 (2023-12-06 07:21:20.139000)

updates: The article from KELO highlights the potential impact of the Federal Reserve's balance sheet rundown on the real economy. The depletion of the reverse securities repurchase facility (RRP) is expected to affect U.S. bank credit and asset prices, leading to falling credit demand and supply next year [2079a1d7].

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Version 0.1 (2023-12-06 06:16:37.628000)

updates: The reduction of the Federal Reserve's balance sheet, known as the 'QT cushion', has raised concerns about its potential impact on financial markets.

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Version 0.09 (2023-11-15 16:58:00.460000)

updates: The article 'The Federal Reserve Ignores the Money Supply at its Peril' criticizes the Fed's neglect of the money supply in monetary policy and its potential consequences on the economy.

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Version 0.08 (2023-11-14 22:19:43.328000)

updates: The article 'The Federal Reserve Ignores the Money Supply at its Peril' criticizes the Fed's approach to monetary policy and emphasizes the importance of money supply

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Version 0.07 (2023-11-14 13:12:37.770000)

updates: The article from Morningstar, Inc. raises concerns about the Federal Reserve's recent monetary policy shift and its potential consequences on productivity, employment costs, and core inflation. It emphasizes the importance of a medium-term view of monetary and financial conditions to support breakthrough innovations and long-term productivity improvements.

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Version 0.06 (2023-11-06 21:35:23.692000)

updates: Restructured and enhanced the narrative for clarity and impact

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Version 0.05 (2023-11-02 01:27:06.413000)

updates: Restructured and streamlined the inputs to create a comprehensive narrative

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Version 0.04 (2023-11-01 14:21:37.613000)