Fed May Boost FIMA Liquidity as Global Markets Swell
US Treasury Secretary Scott Bessent has suggested that the Federal Reserve may consider increasing the size of its Foreign and International Monetary Authorities (FIMA) repo facility. This emergency liquidity tool was established in 2020 to shield the US economy from foreign market stress, but Bessent believes it's time for a review given the significant expansion of global bond markets.
The FIMA facility allows foreign central banks to exchange their holdings of US Treasury securities for dollars, preventing disorderly selling and easing dollar funding pressures. Bessent notes that when the facility was created in 2020, the size of the bond market was much smaller than it is today, making a potential increase in its size 'reasonable.'
The comments come amid concerns about the Japanese yen, which has faced pressure from interest rate differences between Japan and the US. Japanese authorities have intervened in currency markets to support the yen, with Bessent confirming that the US had also joined in this effort.