Fed Prepared to Buy Treasuries
January 29th, 2009Via: MarketWatch:
Pulling out all the stops to try to break the downward spiral of the economy, the Federal Reserve on Wednesday said it would continue to flood the financial system with money and moved a step closer to purchasing longer-term Treasury securities.
The Federal Open Market Committee kept its interest rate target in a range of zero to 0.25%, as expected. Rates will need to stay close to zero for “some time,” the statement said.
The lack of action on interest rates was expected, as was the FOMC’s statement that rates were likely to stay low for a considerable length of time.
The Fed said the economy was weak but still held out hope for a second-half rebound. Deflation became the primary worry on the price front.
All of the action in the statement was related to the Fed’s continuing effort to support credit markets. The Fed has stepped in to keep some markets functioning.
In essence, the Fed has adopted a “throw the kitchen sink” approach to supporting the fragile financial system, which is dragging the economy lower.
“The Fed stands ready to buy anything that anyone suggests might help. The sky is the limit,” said Mike Englund, chief economist at Action Economics.
Buying longer-term Treasurys would be a new tool in the Fed’s arsenal to repair financial markets. Some economists worry that buying Treasurys would cause foreign investors to lose their appetite for the securities.
“If the Fed commits itself to a policy of artificially depressing the returns on Treasury securities for an extended period, it will force investment committees around the world to reconsider their portfolio allocations to the U.S. Treasury market as an asset class,” wrote Lou Crandall, chief economist at Wrightson ICAP in a note to clients.
The Fed said was “prepared” to buy Treasurys “if evolving circumstances indicate that such transactions would be particularly effective in improving conditions in private credit markets.”
Time to print united states note rather than print bonds if the gov’t wants to buy it’s own money. Any justification for the federal reserve has evaporated.
Piss me off, fuckin’ jerks, get on my nerves.
the comrade
ps – we are going to buy a telescope via your amazon link. All hail Farmlet!