Why Is the NY Fed Pumping Billions Into the Money Market?
September 18th, 2019Via: AFP:
For the first time in more than a decade, the US central bank this week stepped into financial markets to keep interest rates on short-term lending from popping above its target range.
The New York Federal Reserve Bank conducted money market interventions on Tuesday and Wednesday and planned another for Thursday morning, as a cash crunch drove up the cost of borrowing for banks that need to replenish the reserves they hold at the central bank.
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Money market rates began to jump on Monday afternoon, hitting as high as 10 percent in some cases, surprising traders.
The reasons behind borrowers’ sudden demand for cash were attributed to a host of technical conditions that converged to drain money out of the system.
There were major cash withdrawals as quarterly corporate taxes came due, at the same time as a surge of US Treasury debt came into the market to finance deficit spending by the federal government.
