Evans: Larger balance sheet may avoid future repo market problems

CHICAGO (Reuters) – Chicago Federal Reserve bank president Charles Evans said on Wednesday that the Fed may be able to avoid future repo market problems simply by increasing its balance sheet rather than setting up new market tools.

Evans said he was open minded to different approaches to avoiding the sort of crunch that hit markets last week, but “it could be the case that a flat out larger balance sheet may correct that.” The Fed needs far more “intelligence” about how banks are managing reserves in the current situation, but said it would be “unhelpful” for the Fed’s efforts to loosen monetary policy if it does not have firm control of its target policy rate.