New York Fed Extends Pause on New Treasury Purchases for Third Month, to Reinvest $14.6 Billion
Summary
- The Fed said it is suspending new Treasury purchases for a third straight month, halting additional liquidity supply to financial markets.
- The Fed said it will maintain its approach of buying only $14.6 billion in short-term Treasuries by reinvesting principal from maturing securities.
- The market expects that if the Fed resumes new Treasury purchases in mid-November, additional liquidity will be supplied to the banking system.
Forecast Trend Report by Period
The Federal Reserve will pause new Treasury purchases for a third straight month, holding off on injecting fresh liquidity into financial markets. Instead, it will buy $14.6 billion of short-term Treasuries by reinvesting principal from maturing securities.
The Federal Reserve Bank of New York said on October 14 that the Fed will not conduct short-term Treasury purchases funded with new cash for a third consecutive month.
Instead, it plans to buy $14.6 billion of short-term Treasuries using principal from maturing securities it already holds. That is distinct from steps that supply fresh liquidity to financial markets.
The decision suggests the Fed sees less urgency for additional liquidity support as financial markets remain relatively stable.
Market participants expect the Fed to resume new Treasury purchases in mid-November. If it does, additional liquidity could flow into the banking system.
JH Kim
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