- Federal Reserve Bank of Dallas President Lorie Logan suggested that the Federal Open Market Committee could enhance its open market operations by adopting central clearing on a voluntary basis.
- The proposal aims to make monetary policy tools, such as standing repo operations, more attractive and effective for market participants, who currently use them sparingly despite Fed encouragement.
- Logan emphasized that maintaining market liquidity requires balancing the benefits of leverage with its associated risks and interactions within the financial system.
Quotes
“could make its open market operations more efficient and effective, and support the strength of U.S. markets more generally, by centrally clearing its operations on a voluntary basis”
“Maintaining strong and efficient financial markets requires both market participants and the official sector to appropriately balance the benefits and risks of leverage and its interaction with market liquidity”