What's the Fed Up To? (FT Alphaville)

The Fed’s secret QE equivalent

Posted by Izabella Kaminska on Aug 12 17:52.

Anyone catch this from the New York Fed on Friday? It’s hugely important:

Beginning Monday, August 15, the New York Fed intends to conduct another series of small-scale reverse repurchase (repo) transactions using all eligible collateral types. The first operation will be conducted using only the expanded reverse repo counterparties announced on July 27, 2011. Subsequent operations in this series will be open to all eligible reverse repo counterparties.

Going forward, the Federal Reserve plans to conduct a series of small-scale reverse repurchase transactions about every two months, which will bring the frequency of these operational exercises in line with that of the Term Deposit Facility exercises.

Like the earlier operational readiness exercises, this work is a matter of prudent advance planning by the Federal Reserve. The operations have been designed to have no material impact on the availability of reserves or on market rates. Specifically, the aggregate amount of outstanding reverse repo transactions will be very small relative to the level of excess reserves, and the transactions will be conducted at current market rates. These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future.

Why so important?

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