Wall Street banks warn that stress in US money markets may prompt the Federal Reserve to take quicker action to manage rising short-term interest rates. Recent fluctuations in tri-party repo rates, which peaked last Friday, have eased but concerns persist about future jumps. Analysts suggest the Fed may need to resume asset purchases to stabilize funding markets, as aggressive Treasury bill sales strain liquidity. The situation highlights fears that reserve levels are no longer ample, necessitating a reassessment of the Fed’s tools.
