Rick Rieder, global chief investment officer of fixed income at BlackRock, said the Federal Reserve "needs to let the balance sheet grow" to prevent a recurrence of this week's spike in the overnight repurchasing rate. The so-called repo rate is the amount hedge funds and banks have to pay to borrow funds for a single day. Rieder made his comments at the CNBC Institutional Investor Delivering Alpha conference on Thursday. Investors say a larger portfolio by the central bank would boost bank reserves and alleviate the lack of cash in funding markets. At a Wednesday news conference, Fed Chairman Jerome Powell said: "[It's] certainly possible that we will need to resume the organic growth of the balance sheet earlier than we thought. That's always been a possibility, and it certainly is now." Rieder said that the "tightness of financing markets is very important, people don't appreciate that." "The fact that [the surge in repo rates] played out aggressively as it did, it pushed the Fed to act," he said.
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