Williams warns modest reserve declines could cause substantial overnight rate increases and market disruptions based on steep demand curves.
“This implies that banks would have to see large increases in overnight rates to be willing to shed modest amounts of reserves—or, conversely, that a modest decline in reserves could induce a substantial increase in overnight rates.”
Williams warns AI-driven execution could reduce trade sizes but increase opaqueness and risks in FX markets.
“Although AI-supported algorithmic-based execution could minimize market impact, it could potentially increase opaqueness and impact the ability to identify emerging risks.”