Federal Reserve Treasury Bills Every Month for $60 billion?

October 12, 2019

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The US Federal Reserve announced that it would begin buying $60 billion of treasury bills per month to improve its control over the interest rate. Federal Reserve called these actions purely technical to support the effective implementation of the interest-rate policy. FED also emphasized that this does represent a change in its monetary stance.

The US Federal Reserve, in a statement on Friday, revealed its plan to buy $60 billion of treasury bills to improve control over its interest that it uses to guide monetary policies. However, the Fed reported that purchases of treasury bills would have little if any impact on the level of longer-term interest rates and broader financial conditions.

The Federal Reserve will start buying treasury bills from mid-October, and according to the official statement, the purchases will extend at least into the second quarter of next year. According to the Bloomberg report, the Fed said the bill purchases would aim to maintain bank reserves in the system at or above the level that prevailed in early September 2019.

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The Federal Open Market Committee is next scheduled to meet later this month to discuss monetary policy and probably cut interest rates for the third time this year. The Fed notified that it would continue to inject liquidity into the markets through overnight and term repurchase agreements.

During the first week of September, bank reserves deposited at the Fed totaled $1.49 trillion, which fell to $1.39 trillion on September 18.