The Federal Reserve continues funding overnight through at least January and will purchase Treasury bills through the second quarter of 2020, the central bank announced Friday.
Following a disruption in mid-September short-term lending markets that sent rising interest rates, the Fed began to conduct its own business of providing financial institutions with cash in exchange for ultra-secure assets such as government bonds.
Most recently, the Fed said the repo operation would end on November 4.  The announcement comes when Chairman Jerome Powell also said that the Fed would expand the size of its $ 4 trillion balance sheet through further short-term T-bill purchases.
Fed officials met at a video conference Oct. 4 to discuss "issues related to the recent pressures in money markets and the implementation of monetary policy," according to a news release.
Central Bank documents state overnight repurchase operations "at least through January" and will purchase bills "at least into the second quarter of next year."
In the latter operation, Powell has maintained by pointing out that government bond purchases, but with a view to expanding the Fed's balance sheet and corresponding bank reserves, should not be confused with the quantitative easing that occurred during and after the financial crisis.
During the QE, the Fed sought to lower long-term interest rates and push its appetite for risk overs. The balance sheet expansion will be "organic," Powell said, and will be focused on ensuring that bank reserves are plentiful and that the Fed's overnight reference rate stays within the targeted range. During the September cash crisis, the fund price rose briefly 5 basis points above the range.
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