(Reuters) – 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 purchases, which will begin Oct. 15, respond to recent disruptions in short-term money markets that pushed the target federal funds rate to the top of its target range and at least once above it. The “technical” program, which Fed Chair Jerome Powell had signaled earlier this week was on its way, will continue at least until the second quarter of 2020, the central bank said.
Bank - Cash - Lending - Markets - January
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.
U.S. President Donald Trump has been railing against Powell and his colleagues for months, demanding first that it stop shrinking the balance sheet and more recently to ease monetary policy outright.
US - Bank - Friday - Pains - Balance
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.
Those bond buys, known as quantitative easing or QE, were designed to push down longer-term interest rates to spur borrowing and investment. The new purchases, of short-term bills, are simply meant to keep money markets operating smoothly.
Effect - Household - Business - Spending
They will therefore have “little if any” meaningful effect “on household and business spending...
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