The Fed sure seems to be getting comfortable with the idea of acting as a centralised counterparty for collateral transactions. It's unclear whether the market's quite as enamored with the idea.
This year's Jackson Hole conference was on monetary policy implementation, which often serves as a shorthand for the following questions: how should the Fed control interest rates, and how big of a role should it play in financial markets?
While the topic seems arcane, it's important to understand how thoroughly the Fed has changed its approach to controlling interest rates (and through that, its relationship with markets). The topic isn't just for technocrats -- the debate now is over whether that change should be a permanent one.Continue reading: The Fed’s slow march into collateral intermediation