Oxford, MS 9/21/2011 (PennyPayDay) – The following are newswire headlines about the FOMC statementFed to extend average maturities of its holdings
To buy $400 billion of Treasuries with 6 to 30 years of remaining maturity
To sell $400 billion of Treasuries with 3 or less years remaining maturity
Fed to reinvest maturing housing assets in housing debt
Fed sees significant downside risks to economic outlook
The way the Fed sees it, economic growth in August was “considerably slower” than they thought it would be, now they just figure growth was too slow than and it “remains slow”. And they have become more worried about the economy’s future path, “there are significant downside risks to the economic outlook, including strains in global financial markets.”
In order to support a stronger recovery they have decided to dance the night away with an up to date version of Operation Twist. The Fed decided to extend the average maturity of its portfolio, by doing the following, “the Committee intends to purchase, by the end of June 2012, $400 billion of Treasury securities with remaining maturities of 6 years to 30 years and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less.” They hope that this not only puts downward pressure on longer-term interest rates, but will help make broader financial conditions more accommodative.” In addition, they will now reinvest the principal payments from its mortgage and Agency related holdings into agency mortgage-backed securities. They will also continue to rollover their Treasuries.
There was no change to their pre-commitment to hold the funds rate steady at its current rate until mid-2013. There was also no change in the number and identity of those who disagreed with the Committee’s decisions; Fisher, Kocherlakota and Plosser were again dissenters.
NY Fed statement on the maturity extension program
http://www.newyorkfed.org/markets/opolicy/operating_policy_110921.html
PennyPayDay Disclaimer
No comments:
Post a Comment