The recent FOMC November meeting indicated that the Federal Reserve is contemplating lowering the award rate on Reverse Repo Facility (RRP) assets by 5 basis points, which could have implications for bank liquidity. The Fed's concern stems from a noted increase in utilization of its Standing Repo Facility and recognition that quantitative tightening (QT) may soon strain bank reserve levels. By cutting the RRP rate, the Fed aims to direct cash—currently at $186 billion in the RRP—into the broader financial system, ensuring ample liquidity. This is evident as money market funds shift between T-bills and RRP based on yield attractiveness. The Fed's proactive stance could be an attempt to mitigate potential liquidity strains before they escalate, signaling increased concern over bank reserves ahead of the next FOMC meeting in December.

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