Federal Reserve Bank of New York · Apr 6, 2026
Adam Copeland and Owen Engbretson argue in Liberty Street Economics that the Fed can shape money markets
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Adam Copeland and Owen Engbretson’s post was published April 6, 2026. It examines how changes to administrative rates and the Federal Reserve’s balance sheet affected Treasury during the tightening period. Using confidential trade-level data, the authors estimate that raising the interest rate on (IORB) or reducing Fed liabilities raises the liquidity risk premium, increasing dealers’ cost of intermediating funding. They identify an important policy possibility: the Fed could influence financing conditions separately from economic conditions. In their hypothetical example, lowering rates could support the economy while reducing Fed liabilities could widen dealer spreads and dampen financial-sector leverage. The authors estimate that, using end-of-sample values, a 100- decrease in IORB and a $400 billion decrease in Fed liabilities would have largely offsetting effects on the liquidity risk premium. This is a conditional implication of their estimates, not a report of an action taken. Their analysis assumes that decisions to change rates or Fed liabilities were exogenous to dealer spreads, and the extent to which the estimates apply beyond the period and repo transactions studied remains unknown.
Headline and summary by Escape Meridian, prepared by Luna from the attributed source. A source check is not independent confirmation of the source’s claims.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Apr 6, 2026 (2026-04-06T12:51:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-07T15:08:24.604Z. First observed: 2026-10-30T20:00:45.987Z. Retrieved: 2026-10-30T21:13:54.354Z.
Referenced by
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Limits
Text as retrieved on October 30, 2026; originally published April 6, 2026. The authors’ analysis assumes that decisions to change rates or Fed liabilities were exogenous to dealer spreads; the post describes this as a plausible assumption for the period studied. The post reports estimates from Treasury repo data and does not establish how well the estimated effects generalize beyond the sample and market studied.
Open question
How well would the estimated effects on dealer spreads carry over to market conditions beyond the period and repo transactions studied?
Source-stated
Copeland and Engbretson study how changes to administrative rates and the Federal Reserve’s balance sheet affect money market conditions, using Treasury repo data.
This post highlights the results of a recent Staff Report that explores how these tools affect money market conditions.
Source-stated
The authors report that increases in IORB and decreases in Fed liabilities raise the liquidity risk premium.
Our main results are that both an increase in IORB or a decrease in Fed liabilities raises the liquidity risk premium, driving up the cost of intermediating funding.
Source-stated
The authors’ estimates imply that a 100-basis-point decrease in IORB and a $400 billion decrease in Fed liabilities would largely offset in their estimated effect on the liquidity risk premium.
Using the values of rates and Fed liabilities at the end of the sample period, our results imply that a 100-basis-point decrease in IORB and a $400 billion decrease in Fed liabilities would have largely offsetting effects on the liquidity risk premium.
Source-stated
The post was published April 6, 2026.
April 6, 2026 The Fed Has Two Tools to Influence Money Market Conditions
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Repurchase agreement
A secured money-market transaction in which securities are bought under an agreement to resell them later. It works like a loan backed by securities; when the Fed does it, it temporarily adds bank reserves.
Reserve balances
Money that banks hold in accounts at the central bank (in the US, the Federal Reserve), much as a household holds bank deposits. Only the central bank can create reserves.
Basis point
One hundredth of one per cent (0.01 per cent), so 100 basis points equal one percentage point; used in money and securities markets for differences in interest rates or yields.
Editorial provenance
Version 1. Publication ID: 48c291aa-ae8a-a6d4-3149-180dd6471260.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-07T15:03:48.416Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: 53e673da3c45326250703c320b225d2704c63d3983c650510028b4261138ea30. Source text hash: e8ae78b07ca1d2392cc5ef1da9485cd2824942d2b143291fe2a80ac0d03cca09.
Revision and source-check history
Version 1 · 2026-11-07T15:08:24.604Z
Adam Copeland and Owen Engbretson argue in Liberty Street Economics that the Fed can shape money markets
Adam Copeland and Owen Engbretson’s post was published April 6, 2026. It examines how changes to administrative rates and the Federal Reserve’s balance sheet affected Treasury during the tightening period. Using confidential trade-level data, the authors estimate that raising the interest rate on (IORB) or reducing Fed liabilities raises the liquidity risk premium, increasing dealers’ cost of intermediating funding. They identify an important policy possibility: the Fed could influence financing conditions separately from economic conditions. In their hypothetical example, lowering rates could support the economy while reducing Fed liabilities could widen dealer spreads and dampen financial-sector leverage. The authors estimate that, using end-of-sample values, a 100- decrease in IORB and a $400 billion decrease in Fed liabilities would have largely offsetting effects on the liquidity risk premium. This is a conditional implication of their estimates, not a report of an action taken. Their analysis assumes that decisions to change rates or Fed liabilities were exogenous to dealer spreads, and the extent to which the estimates apply beyond the period and repo transactions studied remains unknown.
Original source
Federal Reserve Bank of New York · Article
Source details
Original source date: Apr 6, 2026 (2026-04-06T12:51:00.000Z).
Date basis: Date supplied by the publisher’s feed.
Added to Escape Meridian: 2026-11-07T15:08:24.604Z. First observed: 2026-10-30T20:00:45.987Z. Retrieved: 2026-10-30T21:13:54.354Z.
Limits
Text as retrieved on October 30, 2026; originally published April 6, 2026. The authors’ analysis assumes that decisions to change rates or Fed liabilities were exogenous to dealer spreads; the post describes this as a plausible assumption for the period studied. The post reports estimates from Treasury repo data and does not establish how well the estimated effects generalize beyond the sample and market studied.
Open question
How well would the estimated effects on dealer spreads carry over to market conditions beyond the period and repo transactions studied?
Source-stated
Copeland and Engbretson study how changes to administrative rates and the Federal Reserve’s balance sheet affect money market conditions, using Treasury repo data.
This post highlights the results of a recent Staff Report that explores how these tools affect money market conditions.
Source-stated
The authors report that increases in IORB and decreases in Fed liabilities raise the liquidity risk premium.
Our main results are that both an increase in IORB or a decrease in Fed liabilities raises the liquidity risk premium, driving up the cost of intermediating funding.
Source-stated
The authors’ estimates imply that a 100-basis-point decrease in IORB and a $400 billion decrease in Fed liabilities would largely offset in their estimated effect on the liquidity risk premium.
Using the values of rates and Fed liabilities at the end of the sample period, our results imply that a 100-basis-point decrease in IORB and a $400 billion decrease in Fed liabilities would have largely offsetting effects on the liquidity risk premium.
Source-stated
The post was published April 6, 2026.
April 6, 2026 The Fed Has Two Tools to Influence Money Market Conditions
Source and contributor context
Federal Reserve Bank of New York · Publisher
The publisher is identified here. No individual author has been inferred.
Source media
Media retrieval status: unchecked.
Terms and references
Reference context selected by Escape Meridian; separate from source evidence. Entity mentions do not establish authorship, involvement or endorsement.
Repurchase agreement
A secured money-market transaction in which securities are bought under an agreement to resell them later. It works like a loan backed by securities; when the Fed does it, it temporarily adds bank reserves.
Reserve balances
Money that banks hold in accounts at the central bank (in the US, the Federal Reserve), much as a household holds bank deposits. Only the central bank can create reserves.
Basis point
One hundredth of one per cent (0.01 per cent), so 100 basis points equal one percentage point; used in money and securities markets for differences in interest rates or yields.
Editorial provenance
Version 1. Publication ID: 48c291aa-ae8a-a6d4-3149-180dd6471260.
Prepared by openai/gpt-6-luna; grounding review by anthropic/claude-opus-5.5.
Source check: uncertain by anthropic/claude-opus-5.5 on 2026-11-07T15:03:48.416Z. This checks fidelity to the source, not whether its claims are independently true.
Editorial selection: accept; reasons: bridge_admitted_by_model.
Observation: 53e673da3c45326250703c320b225d2704c63d3983c650510028b4261138ea30. Source text hash: e8ae78b07ca1d2392cc5ef1da9485cd2824942d2b143291fe2a80ac0d03cca09.
uncertain · 2026-11-07T15:03:48.416Z · anthropic/claude-opus-5.5
Publication: 48c291aa-ae8a-a6d4-3149-180dd6471260
attribution — pass: The reading correctly attributes the post to Adam Copeland and Owen Engbretson in the Federal Reserve Bank of New York's Liberty Street Economics. The findings are kept as the authors' estimates and implications, not established fact. This is one authored piece, not a listing.
Adam Copeland and Owen Engbretson
summary — uncertain: The summary is faithful, but central terms remain unexplained for a non-specialist. 'Fed liabilities' is never defined; the source defines it as bank reserves plus cash at the overnight reverse repo facility. 'Administrative rates', 'liquidity risk premium' and 'exogenous' are also unexplained, and none of them is in the definitions list. 'The tightening period' is not dated, although the source names the 2022-23 cycle. Smallest repair: add the source's definition of Fed liabilities, name the 2022-23 tightening period, and explain the premium as the cost dealers bear for holding a liquidity buffer, which shows up in their spreads.
our measure is the amount of reserves that banks hold at Federal Reserve Banks plus the amount of cash placed at the Federal Reserve overnight reverse repo facility, hereafter Fed liabilities
date — pass: The originalPublished instant of 2026-04-06 matches the post's dateline of April 6, 2026, and the reading states it at day precision. modifiedAt is only seconds after publication. The reading uses no later events and no hindsight framing, and it presents the hypothetical offset as a conditional estimate. This is a publisher page, so no archive disclosure is needed.
April 6, 2026 The Fed Has Two Tools to Influence Money Market Conditions
support — pass: Each claim matches the source text: the main result, the 100-basis-point and $400 billion offset, the exogeneity assumption and the hypothetical policy mix. Saying the Fed could influence financing conditions separately from economic conditions follows the source's own framing. The generalization question is presented as an open unknown, not as a claim.
These results suggest that the Fed can manage how financing conditions are affected even as it influences economic conditions.
media — pass: No media is selected, and no verified candidates were supplied, so nothing was misidentified.
Challenge or correct this reading
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A secured money-market transaction in which securities are bought under an agreement to resell them later. It works like a loan backed by securities; when the Fed does it, it temporarily adds bank reserves.
Definition referenceMoney that banks hold in accounts at the central bank (in the US, the Federal Reserve), much as a household holds bank deposits. Only the central bank can create reserves.
Definition referenceOne hundredth of one per cent (0.01 per cent), so 100 basis points equal one percentage point; used in money and securities markets for differences in interest rates or yields.
Definition referenceA secured money-market transaction in which securities are bought under an agreement to resell them later. It works like a loan backed by securities; when the Fed does it, it temporarily adds bank reserves.
Definition referenceMoney that banks hold in accounts at the central bank (in the US, the Federal Reserve), much as a household holds bank deposits. Only the central bank can create reserves.
Definition referenceOne hundredth of one per cent (0.01 per cent), so 100 basis points equal one percentage point; used in money and securities markets for differences in interest rates or yields.
Definition reference