Saturday, October 12, 2019
No new QE program? The US Federal Reserve is not supposed to support the economy but to avoid liquidity bottlenecks.
(Photo: picture alliance / dpa)
For the first time in over ten years, monetary authorities in Washington are pumping billions back into the money market. Bond purchases are expected to last at least until the second quarter of 2020. That they are a quantitative easing as in the financial crisis, they reject clear.
The US Federal Reserve intends to buy public debt with a short term (so-called Treasury Bills, short: T-Bills) from next week. The monetary authorities want to reduce the pressure on the money market and provide the financial system with sufficient funds. First, T-Bills will be purchased for around $ 60 billion a month. In the official statement of the central bank leadership, the sum does not occur, but the Federal Reserve of New York, which implements such measures, but they shared on Twitter. Bond purchases begin on Tuesday and continue until the second quarter of next year, according to an official statement. The measures are merely "technical" adjustments and not a change in monetary policy, according to the official Fed opinion. The aim is to keep the interest rate for overnight money in the desired range – and not to stimulate the economy. Fed Chairman Jerome Powell had already signaled the decision at the beginning of the week. He emphasized that this measure was not another quantitative easing (QE) program – which economists are currently disputing. In the financial crisis, the central banks had resorted to this unconventional means to increase the money supply and thus to support economic growth. The Federal Open Market Committee had discussed the negative developments in the money market on 4 October. The representatives unanimously agreed with the announced plans of acquisition. In order to provide the money market with additional liquidity, the ongoing so-called overnight transactions (repo transactions) are to be continued until at least January.