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Fed: Flexible reserve management purchases and balance sheet risks – BNY
BNY Markets’ John Velis and David Tam discuss Federal Reserve reserve management purchases (RMPs), noting that new qualifying language suggests the Federal Open Market Committee (FOMC) is more comfortable with system reserves and may adjust RMPs more flexibly. They highlight that reduced RMPs have already calmed repo volatility, but caution that any pause could spur market speculation about an impending balance sheet runoff, requiring clear Fed communication. [...]