Remember when the Federal Reserve’s Reverse Repo Operation (RRO) was at ~$250Billion and there was great concern of it reaching $500Billion, where the Fed Chair, in not so many words said, “Nothing to see here, We expected this.” And insinuated it was much like their views on inflation e.g., “transitory?”
Guess what? Hint: it’s now closer to $2Trillion than $1Trillion. e.g., as of today $1.6Trillion+ and counting. To wit:
Just about a week ago they doubled the facility from ~$1Trillion to ~$2Trillion.
Now, in about that same time period, it’s already closing in on its implied capacity.
Has it ratcheted up because of month end machinations that always take place? Sure, but the issue here is, if that’s true – what happens next month and beyond?
I think Mr. Powell is “going to need a bigger boat.”
But then again, what do I know.
© 2021 Mark St.Cyr