Analysts: Fed May Lower Bank Reserve Rate to Ease Market Financing Pressure

According to Jinshi data, analysts believe the Federal Reserve may soon consider cutting the interest rate paid to banks on reserve balances to relieve emerging funding pressures in the repo market.The current reserve rate stands 15 basis points above the lower limit of the federal funds target range — with the range set at 4%–4.25% and the effective rate at 4.15%.Experts note that reducing the rate by 5 basis points could encourage banks to redeploy excess reserves into the repo market, helping stabilize short-term borrowing costs.However, analysts at Wrightson ICAP said that while such fine-tuning measures are plausible, the Fed may wait beyond the October policy meeting before implementing any changes.