U.S. Federal Reserve extends liquidity injection until November

This effort that began at the beginning of September, extends about three more weeks, in order to avoid a jump in interest rates on short-term loans. This decision arises after rates suffered a rapid increase last month, when the banks had difficulties in obtaining the necessary money in order to cover the minimum reserves required by the FED, known as “lace”.

According to this, the FED announced daily interventions in the money market until October 10, due to the lack of circulating money forcing an urgent intrusion of it.

In a statement issued by the Federal Reserve of New York this Friday it will continue to offer 75,000 million dollars a day in the so-called repurchase agreements or “repo”, which will offer operations of 14 days, twice a week, at least 35,000 million dollars each time.

For the economists, an accumulation and convergence of conditions resulted in a drainage of cash in the banking system, including the expiration of corporate tax payments, which resulted in the withdrawal of large sums, and the issuance of Treasury debt for finance the federal government deficit.

It is important to mention that the money market is used by banks as a mechanism in the aid of loans for short periods, having a term from one month to a year, with a crucial tool to keep the gears of the economy in good working order.

K.Villarroel

Source: digitaldigital