Fed Annouces it will Buy $60 Billion of Treasury Bills a Month
On Friday the Federal Reserve announced it will buy $60 billion worth of Treasury bills per month to control benchmark interest rate. These actions are "purely technical measures" to support the implementation of its latest interest rate policy and "do not represent a change" to its monetary policy strategy.
The Treasury purchases will begin October 15 and continue "at least into the second quarter of next year." The New York Fed will be purchasing the Treasury bills with the belief that by creating reserves it will mitigate worries of bank liquidity.
The decision follows weeks of market repurchase agreement, or repo, operations conducted by the New York Fed to regulate recent irregularities in overnight lending markets. Recently a scarcity of lenders led yields to spike and push the interest rate outside the Fed's desired window.
The Fed slashed its key interest rate in September and the Federal Open Market Committee next meets October 29 to discuss policy and potentially call for an additional interest rate cut.