By Jonnelle Marte
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.
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.