The Federal Reserve announced that it would again grow its holdings of government-backed securities, a first since it concluded its final round of large-scale bond buying in 2014.
The central bank said on Friday that it had decided to begin buying Treasury bills and would begin the purchases on Tuesday. The Fed will continue buying “at least into the second quarter of next year in order to maintain over time ample reserve balances at or above the level that prevailed in early September 2019,” the central bank said in a statement.
The Fed will also continue to intervene in the market for overnight loans between banks and financial institutions to ensure that markets function smoothly, after rates in that obscure but important corner of the market shot up briefly last month. The Fed will conduct term and overnight repurchase agreement operations “at least through January of next year,” according to the release, “to ensure that the supply of reserves remains ample even during periods of sharp increases in nonreserve liabilities.”
The Fed chair, Jerome H. Powell, had previously signaled that the Fed would begin to buy assets again “soon,” and the release repeats his assertion that the move was purely technical. Because it is not meant to stimulate the economy, it should not be confused with the large-scale bond buying campaign the Fed undertook to help prop up the economy during the Great Recession. That program was called quantitative easing, or Q.E.
The moves “do not represent a change in the stance of monetary policy,” the release said.