SEC Rules Offer Safety Net as Fed Liquidity Facility Usage Slips

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Declining demand for a key Federal Reserve liquidity facility is near a point of resistance thanks to recent regulatory changes that force certain US money-market funds to keep more cash on hand.

Demand for the Fed’s overnight reverse repurchase agreement facility, or RRP, dropped on Tuesday to $238 billion — the lowest since May 2021 — from $261 billion the prior session, according to New York Fed data. It’s the latest in a string of declines since usage of the RRP spiked in late 2022, drawing into question the outlook for the central bank’s balance-sheet runoff.

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