The Fed decision markets need to pay more attention to
Central bank set to make a decision on whether to extend its latest emergency liquidity facility
By Karen Petrou
The writer is managing partner of Federal Financial Analytics
One big market event for early 2024 will come when the US Federal Reserve makes a decision on whether to close its latest emergency liquidity facility on March 11 as a senior Fed official recently signalled it was likely to do so. Called the Bank Term Funding Program, the facility’s name conveys the usual blandness with which the Fed likes to brand the trillions it throws into the financial system. But the BTFP is anything but dull. Without it, all but the biggest US banks could find it even tougher to raise profitability this year; with it, they’ll find it still harder to lend into what the Fed, President Joe Biden, and pretty much everyone else hope will be a robust recovery. The BTFP is just the latest of the many rescue facilities the Fed brought forth after recent crises, marshalling the new programme as Silicon Valley Bank and Signature bank failed and dozens of other regional banks experienced sudden deposit outflows for which many were woefully unprepared….