The Federal Reserve Bank of New York, which implements U.S. monetary policy, raised its offering of liquidity this week to ensure that funding markets continue to operate smoothly and said it would continue to adjust its repurchase operations to foster an effective implementation of policy.
The New York Fed has been gradually reducing its liquidity injections after its intervention in September when a shortage of reserves in the banking system pushed up repo rates beyond the range set by the Federal Open Market Committee (FOMC).
The New York Fed is one of the 12 federal reserve banks in the U.S. but the most important as it implements monetary policy on behalf of the Federal Reserve System through its trading desks and also supervises and regulates financial institutions.
The New York Fed said the changes was made to ensure the supply of reserves at banks remain ample and ease the risk of pressure in money markets that could affect policy implementation.
“They should help support smooth functioning of funding markets as market participants implement business resiliency plans in response to the coronavirus,” the Fed said.
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The New York Fed said it was raising its overnight lending amounts through repo operations today and through March 12 to minimum $150 billion from $100 billion.
The Fed is also raising the amount of money it offers through 2-week repo operations on March 10 and March 12 to $45 billion from $20 billion previously scheduled.
On March 3 the FOMC lowered its target range for the benchmark federal funds rate by 50 basis points to 1.0 to 1.25 percent, it’s first inter-meeting rate cut since Oct. 8, 2008.
The Federal Reserve Bank of New York issued the following statement regarding its repurchase operations: