Post by unlawflcombatnt on Aug 16, 2007 19:09:05 GMT -6
from the Wall Street Journal:
Some See Stealth in Fed Actions
Latest Injection of Funds Fuels Market Speculation Of Rate Easing 'in Effect'
By DAVID WESSEL
August 17, 2007
"Speculation intensified that the Federal Reserve is going to cut interest rates soon -- or even has already in effect done so -- without any clear signal from the Fed to encourage it.
"The way we view the Fed has changed," said James Bianco, president of Bianco Research LLC, a financial-markets research firm, in an email to clients. "Whether this is a temporary or permanent change remains to be seen, but the fact is the Fed eased last Friday ... (T)hey are allowing the effective fed funds rate (what the actual rate is) to deviate from the target fed funds rate (what they want it to be)."
But Federal Reserve Chairman Ben Bernanke, both in principle and in practice, has a commitment to increased transparency and the current Fed is extremely unlikely to change policy without announcement. The effects of a rate cut would be muted if it was shrouded in secrecy....
Morgan Stanley said this week, "We believe that the decision to inject more reserves on Wednesday actually reflects a 'temporary' easing of policy on the part of the Fed. Indeed, they still do not appear to be particularly anxious to announce an inter-meeting cut in the official funds rate target....(T)he Fed is essentially attempting to buy some time to see how things shake out. Remember, there are no rules here -- we are in uncharted territory."...
The Federal Reserve Bank of New York said yesterday (8/16/07) it expects to provide reserves through repurchase agreements, or repo operations, "on most days" for the next two weeks....It added that it "stands ready to arrange further operations as needed to facilitate trading at rates around" the 5.25% target for the federal-funds rate.
In the U.S., banks are required to have a minimum level of reserves on average of a two-week period, known as a "maintenance period." If a bank has excess reserves, it can lend them in the federal-funds market; if it has insufficient reserves, it can borrow them. The Fed adds and drains credit for that market to keep the interest rate near its target, anticipating seasonal ebbs and flows of demand for credit and the U.S. Treasury's debt auctions and other factors.
The Fed injected $5 billion into the market early yesterday through 14-day repurchase agreements, that is, reserves that will be available for the full two weeks of the maintenance period, and another $12 billion for just one day. The European Central Bank didn't intervene in its money markets yesterday."
Some See Stealth in Fed Actions
Latest Injection of Funds Fuels Market Speculation Of Rate Easing 'in Effect'
By DAVID WESSEL
August 17, 2007
"Speculation intensified that the Federal Reserve is going to cut interest rates soon -- or even has already in effect done so -- without any clear signal from the Fed to encourage it.
"The way we view the Fed has changed," said James Bianco, president of Bianco Research LLC, a financial-markets research firm, in an email to clients. "Whether this is a temporary or permanent change remains to be seen, but the fact is the Fed eased last Friday ... (T)hey are allowing the effective fed funds rate (what the actual rate is) to deviate from the target fed funds rate (what they want it to be)."
But Federal Reserve Chairman Ben Bernanke, both in principle and in practice, has a commitment to increased transparency and the current Fed is extremely unlikely to change policy without announcement. The effects of a rate cut would be muted if it was shrouded in secrecy....
Morgan Stanley said this week, "We believe that the decision to inject more reserves on Wednesday actually reflects a 'temporary' easing of policy on the part of the Fed. Indeed, they still do not appear to be particularly anxious to announce an inter-meeting cut in the official funds rate target....(T)he Fed is essentially attempting to buy some time to see how things shake out. Remember, there are no rules here -- we are in uncharted territory."...
The Federal Reserve Bank of New York said yesterday (8/16/07) it expects to provide reserves through repurchase agreements, or repo operations, "on most days" for the next two weeks....It added that it "stands ready to arrange further operations as needed to facilitate trading at rates around" the 5.25% target for the federal-funds rate.
In the U.S., banks are required to have a minimum level of reserves on average of a two-week period, known as a "maintenance period." If a bank has excess reserves, it can lend them in the federal-funds market; if it has insufficient reserves, it can borrow them. The Fed adds and drains credit for that market to keep the interest rate near its target, anticipating seasonal ebbs and flows of demand for credit and the U.S. Treasury's debt auctions and other factors.
The Fed injected $5 billion into the market early yesterday through 14-day repurchase agreements, that is, reserves that will be available for the full two weeks of the maintenance period, and another $12 billion for just one day. The European Central Bank didn't intervene in its money markets yesterday."