J.P. Morgan, Morgan Stanley see U.S. Fed may cut interest on reserves next week

FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid

The fed funds rate has been running consistently above the interest on excess reserves since mid-March, fanning worries excess bank reserves are scarce, which would drive up short-term borrowing costs broadly. “We believe the move higher in EFFR comes as a surprise to the Fed and most market participants since there has been a belief that at current reserve levels EFFR is likely to remain sticky close to IOER,” Morgan Stanley strategists Matthew Hornbach and Sam Elprince wrote in a research note.

Nope

Fait accompli

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