The New York Fed has been gradually reducing its liquidity injections after its intervention in September when a shortage of reserves in the banking system pushed up repo rates beyond the range set by the Federal Open Market Committee (FOMC).
The New York Fed is one of the 12 federal reserve banks in the U.S. but the most important as it implements monetary policy on behalf of the Federal Reserve System through its trading desks and also supervises and regulates financial institutions.
The New York Fed said the changes was made to ensure the supply of reserves at banks remain ample and ease the risk of pressure in money markets that could affect policy implementation.
"They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus," the Fed said.
The New York Fed said it was raising its overnight lending amounts through repo operations today and through March 12 to minimum $150 billion from $100 billion.
The Fed is also raising the amount of money it offers through 2-week repo operations on March 10 and March 12 to $45 billion from $20 billion previously scheduled.
On March 3 the FOMC lowered its target range for the benchmark federal funds rate by 50 basis points to 1.0 to 1.25 percent, it's first inter-meeting rate cut since Oct. 8, 2008.
The Federal Reserve Bank of New York issued the following statement regarding its repurchase operations:
"The Open Market Trading Desk (the Desk) at the Federal Reserve Bank of New York has updated the current monthly schedule of repurchase agreement (repo) operations.
Beginning with today’s operation and through March 12, 2020, the Desk will increase the amount offered in daily overnight repo operations from at least $100 billion to at least $150 billion. In addition, the Desk will increase the amount offered in the two-week term repo operations on Tuesday, March 10, 2020 and Thursday, March 12, 2020 from at least $20 billion to at least $45 billion.
Consistent with the FOMC directive to the Desk, these adjustments are intended to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures that could adversely affect policy implementation. They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus. The Desk will continue to adjust repo operations as needed to foster efficient and effective policy implementation consistent with the FOMC directive.
Detailed information on the schedule and parameters of term and overnight repo operations are provided on the Repurchase Agreement Operational Details page. The Desk will release the next monthly repo operation schedule for the March 13, 2020 to April 13, 2020 period on Thursday, March 12, 2020 around 3:00 PM ET."
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