The Federal Reserve said on Friday that it will start buying about $60 billion p...
- The Federal Reserve said on Friday that it will start buying about $60 billion per month in Treasury bills to ensure “ample reserves” in the banking system, but emphasized the new program does not mark a change in monetary policy.
The central bank also said it would continue to inject cash into overnight lending markets until January by offering daily operations in the market for repurchase agreements, or repos. But it said that the balance sheet expansion is meant to wean money markets off of the daily operations by bringing reserves to a level that accommodates economic growth but is also enough to absorb any spikes in demand.
“The Fed will do whatever it needs to do to keep funding rates near where they want them,” said Ward McCarthy, chief financial economist for Jefferies in New York. “If this proves to be insufficient they’ll simply do more.” The U.S. central bank on Friday was at pains to emphasize that its new balance sheet operations were not a response to that call, and are entirely different from the trillions of dollars of Treasuries and mortgage-backed securities purchases it made during and after the financial crisis.
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