Breaking News
Investing Pro 0
🚨 Our Pro Data Reveals the True Winner of Earnings Season Access Data

At November Fed meeting, officials flagged market resilience amid volatile conditions

Economy Nov 23, 2022 03:16PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: The U.S. Federal Reserve building is pictured in Washington, March 18, 2008. REUTERS/Jason Reed/File Photo

By Michael S. Derby

NEW YORK (Reuters) - When Federal Reserve officials met at the start of the month to weigh another rate increase, some of them were thinking about what the central bank might have to do should the Treasury market run into trouble.

Those concerns were aired in meeting minutes for the rate-setting Federal Open Market Committee’s Nov. 1-2 policy meeting, released Wednesday. Then, officials pressed forward with aggressive rate increases that are part of a campaign to lower the highest levels of inflation seen in 40 years.

The speed of Fed rate hikes, which have also been joined with ongoing central bank action to shed Treasury and mortgage bonds to contract the size of its balance sheet, have generated worries the Fed could break something in financial markets.

Thus far, the Treasury market, which serves as the backbone of the world’s credit system, has held together, although there has been ample concern about low liquidity that’s made trading difficult. Fed officials have thus far described the market as resilient.

“Participants observed that, despite elevated interest rate volatility and indications of strained liquidity conditions, the functioning of the Treasury securities market had been orderly,” the minutes said. Fed staff briefing officials concurred,

The minutes flagged recent events in Britain as a point of concern. There, the central bank was forced to intervene and buy bonds to restore market stability, in a policy that ran counter to the Bank of England’s overall effort to tighten, rather than loosen the stance of monetary policy. Some have worried the Fed might have to restart asset buying in the United States should some sort of trouble develop, and some in Congress have already warned the Fed not to go down this road.

According to the minutes, “a few participants noted the importance of being prepared to address disruptions in U.S. core market functioning in ways that would not affect the stance of monetary policy, especially during episodes of monetary policy tightening.”

The minutes, however, did not say what the Fed could do to calm markets in the face of trouble without taking action to buy bonds, as the central bank did in late 2019 and in the spring of 2020, when markets became unsettled.

Some observers have said a Fed tool called the Standing Repo Facility, which allows eligible firms to quickly convert Treasuries into cash loans, could be an important tool in restoring liquidity. That facility was adopted in the summer of 2021 and is as yet untested.

The minutes also said “several participants noted the risks posed by nonbank financial institutions amid the rapid global tightening of monetary policy and the potential for hidden leverage in these institutions to amplify shocks.”

The discussion on financial stability reflected in the minutes took place before the latest shocks to market stability emerging from the nonbank sector - specifically the cryptocurrency space. It was not until after officials had adjourned their meeting that crypto exchange FTX collapsed and filed for bankruptcy, and it appears that other failures are in the offing.

The Fed's top financial stability official, Vice Chair for Supervision Michael Barr, last week told Congress he was worried about "blowback" to the wider financial system from crypto-related failures.

"We're concerned about the risks that we don't know about in the nonbank sector," Barr told the Senate Banking Committee.

At November Fed meeting, officials flagged market resilience amid volatile conditions

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.
  • Any comment you publish, together with your profile, will be public on and may be indexed and available through third party search engines, such as Google.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
Sign up with Email