What's happening in monetary policy and macroeconomics.
Thursday, November 11, 2010
QE2 Details
As was promised by the Fed, details of the first month of QE2 purchases are spelled out here. This is a bit like what the Fed does in normal times on a daily basis. In pre-crisis mode, the Fed would make a prediction about what would affect reserves on a daily basis, and then intervene in the overnight market in an attempt to hit the fed funds rate target. Now, they plan to buy $75 billion in Treasury securities each month, and a prediction is made concerning how mortgage prepayments will affect the stock of agency securities and mortgage-backed securities (MBS) in the Fed's portfolio. The open market desk then attempts to offset that. For the next month, the forecast is that $30 billion in agency securities and MBS will run off.
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