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Friday, April 16, 2021

Fed plans more Treasury purchases to control lending rates

WASHINGTON (AP) — The Federal Reserve says it will buy roughly $60 billion a month in Treasury bills through mid-2020 to inject cash into the banking system and make it easier to control overnight lending rates.

The action marks the Fed’s latest response to a shortage of cash reserves that developed last month and caused short-term interest rates to spike, sending the Fed’s benchmark rate above its target range.

The Fed also says it will extend a separate short-term lending operation through January that is also intended to boost bank reserves and guard against a shortfall.

Chairman Jerome Powell has said these Treasury purchases aren’t intended to stimulate the economy. On Friday, the Fed said its purchases are “technical” and “should not have any meaningful effects on… the overall level of economic activity.”

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