JP Morgan predicts Fed’s BTFP to provide $2 trillion to US banks and states
JP Morgan Chase has announced that the Federal Reserve’s Bank Term Funding Program (BTFP) will inject nearly $2 trillion into the US banking system, which will help alleviate the current liquidity crisis. The BTFP was launched by the Federal Reserve on March 15 to provide additional funding to eligible depository institutions to meet the needs of all their depositors. JP Morgan stated that the Fed has committed to providing this amount to ease the liquidity crunch. The bank’s strategists believe that the program will provide enough reserves to the banking system and help reverse the tightening experienced by the industry over the past year.
Under the program, loans of up to one year in length will be provided to banks, savings associations, and other eligible institutions as an additional source of liquidity against high-quality securities, reducing the need for institutions to sell those securities in times of stress. According to JP Morgan’s strategists, a significant portion of the $3 trillion of reserves in the US banking system will be held by the largest banks. They also argued that the liquidity crisis was caused by the Fed’s quantitative tightening and interest rate hikes.