Wild swings this week in U.S. money markets have raised fresh concerns about whe...
- Wild swings this week in U.S. money markets have raised fresh concerns about whether the New York Federal Reserve under John Williams has lost its deft touch with markets.
“What has happened in the repo market is far from a minor problem,” said Ward McCarthy, chief financial economist for Jefferies. “That’s a financial crisis waiting to happen if they don’t get that under control.” The bank took no action on Monday when the repo rate first increased and faced technical problems on Tuesday that delayed the repo operation by half an hour.
“It’s probably nothing,” said Willie Delwiche, investment strategist for Baird. “But there is a risk that there is some trouble in the monetary plumbing in the economy.” He became an economist for the Federal Reserve in Washington in 1994, and in 2002 moved to the San Francisco Fed, rising through its ranks to lead the research department and then, in 2011, to head the bank after its president, Janet Yellen, became the Fed’s No. 2 policymaker in Washington.
Markets viewed his comments that central banks should act “at the first sign of economic distress” as a sign that the Fed would cut its benchmark interest rate by 50 basis points. In an unusual move, the Fed issued a clarifying statement later that afternoon saying that Williams was speaking about 20 years of academic research, not sending a signal about future policy actions.
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