FED will monitior liquidity problems in the US
The Federal Reserve should monitor the liquidity of the United States market after problems by the intervention of the central bank lñast week
According to statements by the head of the New York FED, John Williams, when the lack of money worsened, the FED acted quickly and “achieved the expected effect of reducing market tensions.” This situation highlights the FED’s vital role in offering liquidity to the system when markets are under pressure. “We were prepared for such an event, we acted quickly and our actions were successful”, said Williams.
However, in a sign that the problem could be diminishing, this Monday, on the fifth consecutive day of money injection, the FED received orders for only $ 65 billion. However, Williams announced that by the end of the quarter the Federal Reserve expects a number of factors that could support the liquidity adsorption of the banking system.
For last week “the markets were not effectively distributing the liquidity of the system” and the situation had the potential to become more acute, Williams said. Given this scenario, the daily supply of loans to banks will run until October 10.
Due to this reduction in money, short-term interest rates increased greatly and moved away from the FED’s goals. Despite this, demand in the banking market requires very short-term loans to ensure that the reserves do not fall below the required level. As a strategy, the New York FED adds or removes liquidity so that its rates are aligned and not to risk of moving away from its set goals.
K.Villarroel
Source: bancaynegocios
