[9th Reuters]-In the minutes of the Federal Open Market Committee (FOMC) published on the 9th, how the recent fluctuations in short-term interest rates prompted US Federal Reserve (FRB) officials to take action Show.
The following summarizes the recent movements in the money market and the FRB's response.
* The money market was almost stable during the summer, but immediately before the FOMC in September, demand for cash rose rapidly and interest rates began to rise. The demand for corporate tax payments and government bond settlements seems to be the background. Liquidity tensions quickly spread throughout the money market.
* Some money market mutual funds moved to build up reserves rather than lending in the face of uncertain prospects for funding. Interest rates exceeded 5% on September 16 in the repo market. It exceeded 8% on the 17th.
* The rapid rise in repo interest rates has begun to spread to other markets, and the Federal Housing Loan Bank (FHLB), a major lender in the federal funds (FF) market, will refrain from funding to increase supply in the repo market It was.
* As a result, the effective rate of FF interest rates rose to the upper limit of the FRB guidance target range on the 16th. The FRB moved to fund the morning of the 17th.
* The New York Fed will supply up to $ 75 billion through repo transactions on the 17th. Interest rates fell to about 2.5%.
* Following the rapid rise in short-term interest rates, FOMC members agreed that it was time to determine if there were enough reserve deposits in the banking system.
* Reserve deposits are decreasing as FRB gradually reduces its balance sheet. Officials recognized that at some point it might be necessary to rebalance the balance sheet to stabilize short-term interest rates.
* Powell Chairman FRB said on the 8th that it is time to expand the assets owned by the FRB again, and the FRB is seeking to introduce a longer-term solution to deal with the recent turmoil in the money market. Clarified that On the other hand, the re-expansion of the balance sheet is not “never” the same as the large-scale asset purchases taken after the financial crisis, and the view of resuming quantitative monetary easing (QE) was strongly denied.