Federal Reserve Logan: The Federal Reserve should abandon the federal funds rate and use Treasury bonds as collateral for overnight rates

On September 26th, Dallas Federal Reserve President Logan said that < b > the Federal Reserve should abandon the federal funds rate as a benchmark for the execution of monetary policy and instead consider the overnight rate linked to the more robust U.S. Treasury collateral lending market. Logan believes that the federal funds rate target is outdated, and the link between the rarely used interbank market and the overnight money market is fragile and could suddenly break. She said updating the Fed's mechanism for implementing monetary policy would be part of an efficient and effective central banking system. Logan said: "One might say that since everything is normal now, there is no need to act. But if the transmission mechanism between the federal funds rate and other money markets malfunctions, we will need to find alternative targets quickly, and I don't think making important decisions under time pressure is the best way to promote a strong economy and financial system. "She said the tri-party general guaranteed rate (TGCR) could bring the most benefits. Logan pointed out that < b > the TGCR covers more than $1 trillion a day of transactions, so changes can be effectively transmitted in the money market. The federal funds market currently averages less than $100 billion .