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Please consider a Statement Regarding Repurchase Operations from the New York Fed moments ago.

The Desk has released an update to the schedule of repurchase agreement (repo) operations for the current monthly period. Consistent with the most recent FOMC directive, to ensure that the supply of reserves remains ample even during periods of sharp increases in non-reserve liabilities, and to mitigate the risk of money market pressures that could adversely affect policy implementation, the amount offered in overnight repo operations will increase to at least $120 billion starting Thursday, October 24, 2019. The amount offered for the term repo operations scheduled for Thursday, October 24 and Tuesday, October 29, 2019, which span October month end, will increase to at least $45 billion.

Repo Timeline

Three Fed Statements

  1. Emergency repos were needed for "end-of-quarter funding".
  2. Balance sheet expansion is "not QE". Rather, it's "organic growth".
  3. This is "not monetary policy".

Three Mish Comments

  1. Hmm. A quick check of my calendar says the quarter ended on September 30 and today is October 23.
  2. Hmm. Historically "organic" growth was about $2 to $3 billion.
  3. Hmm. Somehow it takes an emergency (but let's no longer call it that), $120 billion "at least" in repetitive "overnight" repos to control interest rates, but that does not constitute "monetary policy"

On October 8, I noted Fed Seeks Firm Grip On Interest Rates, Supposedly Not QE

Mr. Powell emphasized that the coming moves are aimed at "maintaining a firm grip on very-short-term lending rates."

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This is not QE. In no sense is this QE,” said Powell.

Effective Lower Bound

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Firm Grip

It seems the Fed is still struggling to get a "firm grip" on interest rates.


Please review my September 25 post In Search of the Effective Lower Bound.

I claim these "non-emergency", "non-QE", "non-monetary policy" operations suggest we may already be at the effective lower bound for the Fed's current balance sheet holding.

Mike "Mish" Shedlock