Federal Reserve Constricts Credit in the Economy While `Easing’ for Biggest Banks

The Federal Reserve’s “reverse repo facility” has boomed up to $2.554 trillion at 2022 year’s end, the highest amount ever. Since the Fed is paying a very high (for ultra-short-term) rate of 4.3% to financial firms for lending this cash overnight, it is using the reverse repo facility as another means of draining funds out of the credit channel for the economy which the banking system represents. The bank is also paying 4.4% on banks’ excess reserves held at the Fed and out of the economy.