Dallas Fed President Lorie Logan proposed stronger tools to support Treasury markets in a crisis while still favoring a rate hike path. For Bitcoin, that creates two conditional channels: funding relief that could help risk-taking, and tightening that could still weigh on crypto.
Dallas Fed President Lorie Logan proposed stronger tools on November 13 to keep Treasury markets functioning during a crisis, while leaving room for higher interest rates. Her remarks separate two potential influences on Bitcoin: relief from disrupted funding and pressure from further monetary tightening.
Logan presented personal recommendations, not an intervention or an adopted Federal Open Market Committee program. She said the Treasury market was functioning very well and that intervention should be reserved for extreme failures in intermediation. High or rapidly rising yields alone would not justify it, she said.
Lending first, temporary purchases second
Logan's preferred starting point is lending against Treasury securities. The Fed could supply funding at a rate consistent with its monetary-policy target, supporting financial stability while keeping the interest-rate stance it considers necessary.
She also proposed developing central clearing for the Fed's repo lending. Reducing the balance-sheet costs intermediaries incur when passing funding onward could help money reach the broader market more efficiently during stress.
Purchases would serve a different need. When lending cannot resolve dysfunction, buying securities could free space on intermediaries' balance sheets so they can keep trading. But purchases are harder to separate from monetary policy because they can push down term premiums and stimulate the economy.
To limit that effect, Logan suggested holding market-function purchases in a separate account and committing to sell the securities as soon as possible. She argued that purchases expected to unwind quickly should have much less effect on term premiums than holdings kept for years. That would limit the unwanted stimulus, not guarantee its elimination.
Tightening stays on the table
Her rate outlook points toward more tightening. In November 10 remarks, Logan described current monetary policy as accommodative and called for at least two further quarter-point increases to make it modestly restrictive. She made the pace conditional on developments.
That view differs from the committee's. The FOMC's October 28 decision maintained the target range at 3.75% to 4%.
For Bitcoin, the implication is conditional. Restoring disrupted Treasury funding could improve the environment for risk-taking, yet further tightening could still weigh on crypto risk appetite. An August 2023 IMF working paper finds that US monetary tightening reduces a common crypto price factor through risk-taking, but that aggregate finding is not a forecast of Bitcoin's response to Logan's proposals.
Source: CryptoSlate
Trading involves risk.
Risk Disclaimer
