Half a Trillion Dollars Is Sitting at the Fed Earning Nothing
- Usage of reverse repo facility has surged amid glut of cash
- Front-end interest rates have been under downward pressure
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There’s so much spare cash sloshing around U.S. funding markets that investors are choosing to park almost half a trillion dollars at the central bank -- earning absolutely nothing.
Usage of the Federal Reserve’s reverse repo facility -- a mechanism that’s part of the central bank’s arsenal for helping to steer short-term interest rates -- surged on Thursday to an unprecedented $485.3 billion. And with the forces driving the dollar glut still some way from abating, that figure could climb further, adding fuel to an increasingly complex debate about what the Fed should do with its various tools to keep a rein on policy.