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Respect for money in the US financial crisis compels Fed policy


The Federal Office may have to rethink its weapons, investigators say, because the large amount of money held in the US has made it increasingly difficult for a central bank to properly manage its policies.

Short-term interest rates have plummeted since the beginning of this year as financial institutions with money are competing for loans from high-risk vehicles, such as the recently-imposed US government securities or so-called redemption agreements.

“Obviously there are big, unsatisfactory demands… And it’s like a music game in terms of who can get it first,” said Teresa Ho, an expert at JPMorgan, who estimates there is a $ 751bn difference in the stock market since April.

The increase comes in the form of a Fed real estate program that buys $ 120bn in US government debt each month. Bank deposits moving in the cash register and the Ministry of Finance’s proposal to raise their own funds and pay for funds in line with the latest Congress have also increased spending.

At the same time, the department has reimbursed its Treasury refunds, which are matured in one year or less – which has reduced the availability of the necessary financial resources.

A lot of money has been returned to Feeding, with the need for a major restitution bank – which gives financial companies a temporary suspension – is on the rise. Daily spending last week has risen sharply since 2017, hitting $ 369bn on Friday.

The $ bn line chart showing Cash glut adds to the importance of the Fed's cash flows

This has pushed the Fed’s interest rate to a level that has begun to attract interest from experts and investors.

Federal funds are moving at 0.06%, down between the 0-0.25% target the central bank is looking at. A signal low of 0.05% could be enough to cause an action from the Fed, says Kelcie Gerson, an expert at Morgan Stanley.

Money is already there maximizing opportunities the rest of the repo program is removed the border on the number of financial companies that are able to stop a central bank from $ 30bn to $ 80bn in order to eliminate the volume of items in the system and reduce the short-term decline.

The next step could include raising the interest rate the Fed pays banks in areas where they live in the central bank, experts say. China is increasing the amount that Fed Funds pay in its recurring program.

“The Fed is vigilant in this regard,” adds Thomas Simons, a Jefferies economist. They do not want this to happen. ”


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