The Federal Reserve is poised to begin at least a six-month operation to buy about $60 billion of Treasury bills per month.
The Federal Reserve is poised to begin at least a six-month operation to buy about $60 billion of Treasury bills per month, as the central bank seeks to ease cash shortages that caused a recent spike in the overnight cost of borrowing.
“They are going for it,” said Ralph Axel, an interest rate strategist at Bank of America. “They are hitting this hard. I think it’s the right thing to do.” Fed Chairman Jerome H. Powell revealed plans to resume the “organic growth” of the central bank’s balance sheet earlier this week, implying that it would buy Treasuries in line with the growth of the central bank’s liabilities. But the planned purchases are well in excess of the growth in currency in circulation, which has increased at an average of $5.6 billion per month since April.
The Fed’s plans to buy short-dated bills, rather than longer-term Treasuries, is seen as an attempt to distance the new measures from quantitative easing — the crisis-era stimulus program that the central bank used to lower long-term borrowing costs and boost the economy.In its statement on Friday, the Fed said the current actions “are purely technical measures to support the effective implementation” of its interest-rate policy, and “do not represent a change” in its monetary stance.
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