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New York Fed to further reduce repo support

Published 02/13/2020, 03:59 PM
Updated 02/13/2020, 04:01 PM
New York Fed to further reduce repo support

New York Fed to further reduce repo support

By Jonnelle Marte

NEW YORK (Reuters) - The New York Federal Reserve will further scale back the support it is providing in the overnight lending markets for cash, the central bank said Thursday.

The cap on the Fed's daily operations in the market for repurchase agreements, or repo, will be reduced to $100 billion, from $120 billion, starting Friday.

The maximum offerings on term repo operations, which last two weeks, will be reduced on Tuesday to $25 billion from $30 billion. In March, the cap will be reduced further to $20 billion.

The Fed will continue to purchase $60 billion a month in short-term Treasury bills, a program policymakers describe as a technical adjustment aimed at increasing the level of reserves.

The U.S. central bank began intervening in money markets in mid-September, when a shortage of cash led to a spike in short-term borrowing costs. The Fed started purchasing bills in mid-October to boost reserves above the levels seen in early September, before the volatility began.

Policymakers said the long-term plan is to raise reserves to a level where the repo operations are no longer needed - a point they expect to reach around mid-year. Fed Chair Jerome Powell reiterated those plans during the press conference after the January policy meeting and in testimony before Congress this week.

Latest comments

Markets not going to like the this, why would they do this? /sarcasm
Just wait until short term rates spike above 10% again and im sure they'll be quick to dump back on the liquidity train
till the next time. endless fiat for their banks who they really represent
So the fed is saying we're gonna limit the amount of free money we've pumped into the market, meaning we believe the stock market is reaching a temporary high and probably will need a rest but if it sets back (Dow) 3000-3500 points or a 500 daily ding we're ready to pump up the balloon a lot more.
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