Barclays: if the repurchase rate remains high, the Federal Reserve may need to intervene.

If the repurchase agreement rate returns to the upper range of the effective federal funds rate target range, or just at the upper limit, and continues for several weeks, policymakers may need to make adjustments, according to Barclays strategist Samuel Earl in a report. Earl wrote that the repurchase market is an "important driver" of the federal funds rate, and officials should be concerned about repurchase rates persisting at or even above the upper limit of the range. This implies that the Federal Reserve will ultimately need to increase reserves through more repurchase lending or direct purchases of Treasury securities. Earl pointed out that there may be resistance from FOMC members, including Director Michelle Bowman who takes a hawkish stance on balance sheet issues, who may be cautious about maintaining large asset portfolios or intervening in the repurchase market only when it is seen as just mild pressure.