Fed opts for asset purchases as liquidity solution
Central bank chooses not to address possible plumbing issues – at least for now
The Federal Reserve is soon going to resume outright Treasury purchases to help ease routine funding pressures, chairman Jerome Powell said on October 8.
The move aims to provide a solution to last month’s volatility in secured overnight rates and is not a form of monetary easing, Powell emphasised. After much speculation, the announcement shows the Fed has – for now – opted for a fresh top-up of reserves instead of other proposed solutions.
Last month, money market rates and repo rates rose
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