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Two former US Federal Reserve (Fed) officials  Brian Sack and Joseph Gagnon wrote in a blog published on Thursday, the Fed needs to use the repo rate to minimize the recent disruptive money market volatility that poses risks to the economy.

Key Quotes (via Reuters):

“Volatility in this market threatens the functioning of markets more broadly and could ultimately hurt the economy.”  

“A better approach is needed.”

“Not opposed to the Fed’s “floor system,” which it uses to set rates by paying interest on bank reserves.”

“The Fed should make changes to create a system that is more resilient and effective.”

The Fed should consider targeting the repo rate when setting policy instead of targeting the fed funds rate.”

The US dollar index rallied in the US last session after the Fed then said it would  boost the size of its intervention  in the repurchase, or repo, market to $100 billion overnight Thursday from $75 billion, while doubling the size of a two-week offering Thursday to $60 billion.

The spot now trades back above the 99 handle, testing three-week tops, as markets look past the US political turmoil for the time being.