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Fed Expands Lending To Tackle Liquidity Crisis

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The Federal Reserve on Friday fought back against tightening liquidity strains in financial markets, raising the size of its credit auctions to $100bn and making a further $100bn available through a series of new term repurchase operations.

The Fed said in a statement its actions were intended to ”address liquidity pressures in the funding markets”.


Fed report tempers services revivial - Mar-06Banks urged to rethink pay deals - Feb-26Fed’s collateral book mostly in loans - Feb-24Fed chief's speech knocks banks and mortgage groups - Mar-05Fed ready to act if prices psychology turns sour - Feb-22Martin Wolf: US risks mother of all meltdowns - Feb-19The 28-day term repurchase operations will allow primary dealers to borrow against any type of securities, including agency-backed mortgages. The Fed said it expected the series of term repos ”to cumulate to $100bn.”

The credit auctions will be done via the Fed’s Term Auction Facility, which allows banks to borrow from the Fed at lower interest rates than those offered at the discount window.

The US central bank also said that it would conduct the TAF auctions for at least the next six months ”unless evolving market conditions clearly indicate that such auctions are no longer necessary.”

The Fed announced the TAF program in mid-December as part of a co-ordinated package of measures unveiled by leading western central banks to calm money markets.

It said it could increase the size of both facilities if needed, adding that it was in ”close consultation with foreign central bank counterparties concerning liquidity conditions in markets.”

However, there was no announcement on further swap deals to create additional offshore dollar liquidity.

The Fed has loaned $160bn in funds since mid-December in six auctions through the TAF in an effort to increase the supply of funds available for lending.

”This is clearly an attempt by the Fed to keep the market from thinking there will be an inter-meeting ease, said Ian Lyngen, strategist at RBS Greenwich Capital.

On Friday Richard Fisher, president of the Dallas Fed said investors should not expect the Fed to maintain the recent pace of rate cuts, after emergency and rapid cuts in January.

“We reacted with very deliberate actions’’ in January, Mr Fisher said in an interview with Bloomberg. “That shouldn’t lead markets to expectations that we will continue to react in that manner.’’

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  • 294 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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