FRB Vice Chair Fischer: Market Liquidity is “Adequate”

On Tuesday, November 15th, Federal Reserve Board (FRB) Vice Chair Stanley Fischer cautioned, during a speech, that market liquidity could be hit during times of severe stress, especially fire sales, but overall, liquidity is adequate.

“Overall, liquidity is adequate by most measures, in most markets, and most of the time,” Mr. Fischer said. “Bid-ask spreads and price-impact measures point toward liquidity that is good by historical standards, and we have not observed declines in market liquidity in recent episodes of high market volatility,” Mr. Fischer said. He went on to explain that adverse changes in asset prices, margin calls and higher haircuts could wind up forcing firms to sell assets to obtain cash and deleverage, affecting other market participants, according to a recent Wall Street Journal article.

Mr. Fischer said changes to market liquidity should be analyzed in the broader context of preserving a strong U.S. financial system.

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