The Fed is extending its overnight funding operations through January 2020


The Federal Reserve will be continuing its overnight funding operations through at least January and will buy Treasury bills through the second quarter of 2020, the central bank announced Friday.

The T-bill purchases will be large — $60 billion a month despite Fed officials’ insistence that the operation will be an “organic” move to grow the central bank’s balance sheet and the level of bank reserves, as well as to keep the benchmark funds rate within its targeted range. The purchases will involve maturities of between five and 52 weeks.

Following a disruption in short-term lending markets in mid-September that sent interest rates soaring, the Fed began conducting its own operations to provide financial institutions with cash in exchange for ultra-safe assets like government bonds.

Most recently, the Fed said the repo operation would end Nov. 4.

The announcement comes as Chairman Jerome Powell also said that the Fed will be expanding the size of its $4 trillion balance sheet through further short-term T-bill purchases.

Fed officials met by video conference on Oct. 4 to discuss “issues related to the recent pressures in money markets and monetary policy implementation,” according to a news release.

Documents from the central bank state the overnight repurchase operations “at least through January” and will be buying T-bills “at least into the second quarter of next year.”

On the latter operation, Powell has been adamant in pointing out that the T-bill purchases, though aimed at expanding the Fed’s balance sheet and, correspondingly, bank reserves, this should not be confused with the quantitative easing that occurred during and after the financial crisis.

Under QE, the Fed sought to lower long-term rates and push the appetite for risk assets. The balance sheet expansion will be “organic,” Powell has said, and will be targeted at making sure bank reserves are plentiful and that the Fed’s benchmark overnight borrowing rate stays within its targeted range. During the September cash crunch, the funds rate briefly rose 5 basis points above the range.

This is breaking news. Check back here for updates.

Articles You May Like

Where Should Financial Literacy Be Taught—Home Or School?
Netflix forces Wall Street to focus on profit and revenue with decision to stop reporting subscriber numbers in 2025
Airline executives predict a record summer and even more demand for first class
Procter & Gamble sales disappoint as price hikes slow down
Biden Sets New Nursing Home Staffing Rules

Leave a Reply

Your email address will not be published. Required fields are marked *