6 Months Before The Fed Is Said To Hike Rates, It Still Has No Idea How It Will Do That

As recently as a month ago we were pounding the table that the Fed’s reverse-repo program, which was long said to be, alongside the IOER, the key component that would enable the Fed to hike rates in an environment in which the Fed Funds rate is no longer relevant, is a joke, most notably in “Why The Fed Is Full Of It: Reverse Repo Is A Fairy Tale.”
What we also repeated is that while the RRP is meaningless for actual monetary policy it is quite meaningful as a Fed-funded and subsidized quarter-end window dressing facility, widely used by money market funds and banks at the end of every quarter to make their balance sheets appear of higher quality than they are.

Which brings us to yesterday’s FOMC minutes. It was there that the FOMC once again reminded everyone of the trivial folly which is speculation just when the Fed will hike rates, when the Fed itself still has no idea how it will actually implement this mechanically, theoretically or practically.
From the FOMC Minutes:
… the manager reported on potential arrangements that would allow depository institutions to pledge funds held in a segregated account at the Federal Reserve as collateral in borrowing transactions with private creditors and would provide an additional supplementary tool during policy normalization; the manager noted possible next steps that the staff could potentially undertake to investigate the issues related to such arrangements.

This post was published at Zero Hedge on 11/20/2014.