A key facility the Federal Reserve uses to help control short-term interest rates saw record inflows on Friday, the final trading day of the year.
The New York Fed said that its reverse repo facility took in $2.554 trillion in cash from money market funds and other eligible financial firms, besting the prior high water mark seen on Sept. 30, when inflows totaled $2.426 trillion.
The cash surge was almost certainly tipped into record territory on a typical quarter end pattern which can be further exacerbated on the year end. On those dates, for a variety of reasons, many financial firms prefer to park cash at the central bank rather than in private markets.
The Fed’s reverse repo facility has been very active for some time. After seeing almost no uptake for an extended period, cash began to gravitate toward the central bank in the spring of 2021 and then grew consistently. Daily reverse repo usage has been holding over the $2 trillion mark since June.