Fed official sees room to lower bank reserves in September

The Federal Reserve Bank of Dallas’ President and CEO Lorie Logan stated that the US central bank has more room to reduce its banking reserves, anticipating that US banks may turn to use its standing repo facility (SRF) in September to ease potential liquidity pressures.

"We could see some temporary pressure around the tax date and quarter-end in September," Logan said in prepared remarks at the Bank of Mexico’s centennial conference in Mexico City. "I was encouraged to see market participants using the SRF over the June quarter-end, and I anticipate they will similarly use our ceiling tools if necessary in September."

SRF allow banks to quickly convert government bonds into cash, providing liquidity and reducing the need for emergency Federal Reserve intervention in case of a shortfall at any commercial bank.