Tag: policymakers

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Wall Street warns money-market stress could push Fed into rapid intervention

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The post Wall Street warns money-market stress could push Fed into rapid intervention appeared com. Wall Street analysts cautioned that renewed strain in US money markets could prompt the Fed to step in sooner to contain another surge in short-term borrowing costs. This week, short-term funding rates have leveled off, following jitters in late October that raised red flags within the financial system’s core operations. Just last week, the tri-party repo rate rose to levels not seen since 2020, despite the central bank’s confirmation that it will pause balance-sheet runoff on December 1. Now, tri-party repo rates have settled closer to the Fed’s rate on reserves, reflecting calmer market conditions. However, many still see the potential for renewed volatility in the weeks ahead. Deirdre Dunn, head of rates at Wall Street bank Citigroup, and chair of the Treasury Borrowing Advisory Committee, commented, “I don’t think it was a one-off anomaly of just a few days of volatility.” Analysts say the central bank may have to continue asset purchases Curvature Securities’ Scott Skyrm noted markets have “normalized” for now, as banks tapped a Fed facility to ease strain. Still, he cautioned that funding pressures will likely resurface at the turn of the month and again at year-end. Echoing those concerns, Samuel Earl, a US rate strategist at Barclays, emphasized that funding conditions remain vulnerable to change. Some analysts and policymakers believe the Fed may eventually need to resume asset purchases if the strain doesn’t subside. Lorie Logan, head of the Dallas Fed and a former market expert at the New York Fed, particularly noted that the central bank may need to consider asset purchases if repo rates remain elevated. Meanwhile, Dunn advocated that the central bank consider additional solutions. He remarked: “One could argue that we’re not in an ample reserve environment anymore and these events could continue to happen . It would be prudent for the Fed.

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EUR/JPY loses traction to near 176.50 despite ECB’s cautious stance

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The post EUR/JPY loses traction to near 176. 50 despite ECB’s cautious stance appeared com. The EUR/JPY cross loses ground around 176. 60 during the Asian session on Friday. The Japanese Yen (JPY) strengthens against the US Dollar on minutes of the Bank of Japan’s (BoJ) September policy meeting and verbal intervention from Japanese officials. Minutes from the Bank of Japan’s (BoJ) September meeting revealed on Wednesday that an increasing number of policymakers at the central bank believed that conditions were falling into place for interest rates to rise, with two members calling for an immediate hike. The hawkish BoJ minutes may give some support to the JPY in the near future. Some verbal intervention from Japanese officials could also lift the JPY against the EUR. Finance Minister Japan’s Finance Minister Satsuki Katayama had escalated the verbal intervention last week, saying that officials were “monitoring foreign exchange movements with a high sense of urgency.” On the other hand, the cautious stance from the European Central Bank might help limit the EUR’s losses. ECB President Christine Lagarde highlighted that the central bank is “in a good place” and further stated it will do whatever is needed to stay in such a favorable position. ECB Governing Council member Boris Vujcic stated that current policy is “in a good place” and that “we feel that we have done our job” after lowering inflation to the ECB’s target. Traders see a less than 50% odds of further reductions by July 2026. A Morningstar analysis notes that swap markets are pricing in just a 25 basis point (bps) cut by September 2026. Japanese Yen FAQs The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other.