Bank reserves are not what they are made out to be. This implies that the Fed’s policies do not work; and also invalidates their current policy framework!
Regardless of what people believe the Fed can do, their policy framework has them trying to time economic cycles like everyone else – without better results.
While the Fed has misdiagnosed the collateral issues plaguing the repo market, its new SRF can still alleviate some pressure during times of crisis.
The Fed announced that two new repo facilities will be established to ensure dealers can access cash during a crisis. But the Fed has misdiagnosed the problem.
Is it unreasonable for the Fed to take longer to make their decisions amid economic uncertainty? Only if they have more insight into the future. Do they? Nope.
Asking the question feels sacrilegious, given how we are taught that central banks control economies. But, what if they do not actually control interest rates?