SUMMARY
- At the December 10 FOMC meeting, the Federal Reserve cut interest rates by 0.25%, bringing the range to 3.5% – 3.75%. Further, Fed Chair Jerome Powell announced that the Fed would start purchasing shorter-term Treasury securities “for the sole purpose of maintaining an ample supply of reserves over time.” Starting December 12, these purchases are expected to total about $40 billion per month, but the amount may vary from month-to-month.
- According to the Fed, the goal is to ease pressure in overnight funding markets and keep the fed funds rate within its target range.
- In 2019, Fed reserves also dropped below what was then deemed to be the ‘ample reserves line’ ($2 trillion) and the Fed restarted quantitative easing—a dynamic that now appears to be re-emerging, as buying shorter-term Treasuries is indeed a form of monetary easing.
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