EFFINGHAM, Ill (Reuters) - St. Louis Federal Reserve bank president James Bullard said on Monday he would support the creation of a standing repo facility at the Fed in the “medium term” to avoid the sort of problems that developed last week in important short-term funding markets.
An ongoing repo facility, which the Fed has debated but not yet implemented, “would put a cap on rates” if shortages develop in private markets and rates start to rise, Bullard said. “You probably would not have to use it most of the time. Its mere existence would stabilize trading.”
Reporting by Howard Schneider; Editing by Andrea Ricci