"It is certainly possible that we will need to resume the organic growth of the balance sheet earlier than we thought."
- Chairman Jerome Powell, 18 September 2019
This week we saw some disturbing ructions in the repo market, including the intraday yield soar to above 8%, depicted in chart 1 of our report. While it is not atypical for such increases to take place at month-, quarter-, or year-end, as demand for reserves rises to meet bank liquidity requirements, this took place midmonth, which is highly unusual. The repo spike was a key topic of discussion at Chairman Powell's post-FOMC press conference, and the topic of this week's Economics Weekly.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.