First Time Since the Financial Crash 10 Years Ago, Fed Pumps Money into Markets

Sept. 19, 2019 (EIRNS)—Since Sept. 17, the Federal Reserve in three tranches within 72 hours has pumped $203 billion into markets in its attempt to keep interest rates from moving higher. The New York Federal Reserve said today it would inject another $75 billion into the market to keep the federal funds rate within its target range. Short-term rates had earlier this week shot up as high as 10%, threatening to disrupt the bond market and the overall lending system.

According to Markets Insider reporter Gina Heeb, there is an ongoing debate about why the amount of cash that banks have on hand for short-term funding needs dried up early this week. But the shortage came after businesses had to pay quarterly tax bills at the same time that the Treasury issued billions in new bonds.

Also, a widening gap between federal revenue and expenditures has exacerbated volatility in the $2 trillion repo market. The national budget deficit jumped past $1 trillion in the first 11 months of the fiscal year, a level it hadn’t reached since 2012, when the U.S. was still climbing out of the Great Recession, Heeb pointed out.