The Federal Reserve may exit the bank's regular financing program in March, increasing the possibility of interest rate cuts
According to Jinshi's report, the Federal Reserve may exit the Bank Term Funding Program (BTFP) in March. This would mean that by 2024, foreign exchange reserves and liquidity will face additional sustained resistance. This increases the possibility of a rate cut by the Federal Reserve earlier this year. BTFP was created after the Silicon Valley banking crisis with the aim of helping troubled banks obtain liquidity when bond prices fall. However, in recent months, its usage has surged to over $140 billion. The expiration of BTFP will mean that as these loans mature throughout the year, foreign exchange reserves will once again be depleted. In this new paradigm, it appears that the Federal Reserve is now focused on liquidity, which adds to its rationale for a rate cut earlier this year. The market currently expects a 17 basis point rate cut at the meeting on March 20th.
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