The Federal Reserve of the United States announced Friday that it will acquire Treasury bonds, at a rate of 60,000 million dollars per month, in order to keep the reserves in the banking system well stocked, a measure that is recorded after there have been tensions of liquidity in capital markets.
Purchases, which Fed Chairman Jerome Powell had already anticipated last Tuesday during a speech in Denver, Colorado, will begin next Tuesday.
The breadth of reserves "ensures that control over the level of the federal funds rate and other short-term interest rates is primarily exercised by establishing the rates administered by the Federal Reserve," a statement from the institution said.
In his dissertation, Powell had emphasized that the growth of the balance sheet "for reserve management purposes should not be confused, in any way, with the large-scale asset purchase programs that we implemented after the financial crisis. ".
In the face of the financial crisis of 2008, the Reserve overturned torrents of money in the financial system and its portfolio of assets jumped from $ 1 trillion in 2007 to $ 4.5 trillion in 2015.
As the economic situation has improved, the Reserve has gradually reduced its assets to just under 4 billion dollars, but that has reduced the level of reserves available to banks.
The acquisitions announced today seek to avoid the recurrence of liquidity tensions that capital markets have experienced in recent times, which reflect that banks are now more reluctant to lend their reserves.
The Central Bank's Open Market Committee, which directs US monetary policy, said the Fed will buy Treasury bonds "at least until the second quarter of next year in order to maintain large reserve balances at the level, or above of the level, which prevailed at the beginning of September 2019 ".
Additionally, the Fed will carry out fixed-term repurchase (repos) operations and at a low day at least until January of next year "to ensure that the supply of reserves remains broad even during periods of sharp increases in liabilities outside the reserve" .
The Federal Reserve has been acquiring up to $ 20 billion a month in a range of Treasury securities since August to replace the maturing mortgage securities. Purchases for 60,000 million dollars announced are added to the ongoing acquisitions.
The Federal Reserve Bank of New YorK also injected 30.8 billion dollars into the financial system on Wednesday, through repurchase agreements to alleviate financing pressures in capital markets.
Reserves fell to less than 1.4 billion dollars last month, compared to 2.8 billion in 2014, when the Reserve suspended its purchase of assets.
The statement added that these operations will also "mitigate the risk of momentary market pressures that may adversely affect the execution of monetary policy."
. (tagsToTranslate) Reserve (t) Federal (t) US (t) announces (t) Treasury