The Federal Reserve is facing challenges in convincing banks to utilize a lending tool aimed at enhancing control over short-term money markets. Some banks have increased usage of the standing repo facility in the last month, but reluctance remains among some to tap it more aggressively, potentially impacting the Fed’s ability to manage rates efficiently.

At a recent private meeting with the New York Fed, some bank executives expressed concerns that using the facility could lead to a negative stigma, especially as market volatility rises. This hesitation could hinder the Fed’s efforts to effectively manage rates as it continues to reduce its $6.6 trillion asset portfolio.

Read more at Wall Street Journal: The Fed’s Tool for Calming Short-Term Funding Markets Is Being Tested