NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases this month’s edition of Bank Talk: The After-Show.
In Bank Talk Talks Fed Talk, Ethan and Van delve into the Fed’s balance sheet to explain why—to meet its policy objective to provide abundant excess reserves to the financial system—it will need to add $100 billion to its System Open Market Account portfolio every year just to keep up with the accelerating growth of currency in circulation.
Drawing from quarterly data in the most recent Flow of Funds report, Ethan details how currency held outside the U.S. is driving the total growth in currency in circulation and explains why low interest rates also contribute to more demand for currency. If this growth trend in currency continues, the Fed may be forced to expand its purchases beyond Treasury bills to longer term securities, further dampening rates and keeping them down for a long time, with negative repercussions for bank profitability.
To view the report, click here.
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KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.