Breaking News
Investing Pro 0
Cyber Monday SALE: Up to 54% OFF InvestingPro+ CLAIM OFFER

Powell Sees Fed Resuming Balance-Sheet Growth, But It's Not QE

Stock Markets Oct 08, 2019 03:08PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

(Bloomberg) -- Federal Reserve Chairman Jerome Powell said the central bank will resume purchases of Treasury securities in an effort to avoid a repeat of recent turmoil in money markets, while leaving his options open on interest rates weeks ahead of policy makers’ next meeting.

“My colleagues and I will soon announce measures to add to the supply of reserves over time,” he said in the text of a speech to be delivered Tuesday to the National Association of Business Economics in Denver.

He suggested that the purchases would be made up of Treasury bills and stressed the buying should not be seen as a return of the crisis-era quantitative easing programs that the Fed engaged in a decade ago to boost the economy. Three-month bill yields fell on the comments, while U.S. stocks pared losses and the dollar was higher.

“I want to emphasize that growth of our balance sheet for reserve management purposes should in no way be confused with the large-scale asset purchase programs that we deployed after the financial crisis,” he said. “Neither the recent technical issues nor the purchases of Treasury bills we are contemplating to resolve them should materially affect the stance of monetary policy.”

The Fed has cut interest rates twice this year to shelter the U.S. economy from weak global growth and trade-policy uncertainty. Traders in federal funds futures are betting that the Federal Open Market Committee will reduce rates again at its Oct. 29-30 meeting from the current target range of 1.75% to 2%. Futures were little changed following the release of Powell’s comments.

No Preset Path

Powell was non-committal on what the Fed’s next move would be.

“Looking ahead, policy is not on a preset course,” he said. “The next FOMC meeting is several weeks away, and we will be carefully monitoring incoming information.”

He said the actions that the Fed has already taken “are providing support for the outlook,” which remains favorable but faces risks, principally from global developments such as trade and Brexit.

But he added, “we will act as appropriate to support continued growth, a strong job market, and inflation moving back to our symmetric 2% objective.”

The economy has recently shown signs of slowing as weakness overseas has spread to the U.S. and moved from domestic manufacturing industries to services.

The job market has also downshifted, even as unemployment has fallen to a half-century low of 3.5%. Nonfarm payrolls grew by an average of 157,000 per month in the third quarter, compared with gains above 200,000 earlier in the expansion.

Powell said that work done by the Fed mining private-sector data suggested the most recent job gains may ultimately be revised lower, but that the pace would still be above the level needed to hold unemployment steady.

Money markets were roiled last month as a combination of corporate tax payments and the settlement of Treasury debt purchases temporarily sent short-term interest rates skyrocketing.

The Fed announced last week that it will extend through October the ad hoc liquidity lifeline that it’s been offering to U.S. funding markets since then.

“We will not hesitate to conduct temporary operations if needed to foster trading in the federal funds market at rates within the target range,” Powell said.

“As we indicated in our March statement on balance sheet normalization, at some point, we will begin increasing our securities holdings to maintain an appropriate level of reserves,” he added. “That time is now upon us.”

Powell Sees Fed Resuming Balance-Sheet Growth, But It's Not QE
 

Related Articles

Faraday Future appoints Xuefeng Chen as global CEO
Faraday Future appoints Xuefeng Chen as global CEO By Reuters - Nov 28, 2022 5

(Reuters) - Electric-vehicle startup Faraday Future Intelligent Electric said on Monday it has appointed Xuefeng Chen as global chief executive officer, sending shares up 1.4% in...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
Jason Zou
Jason Zou Oct 08, 2019 3:54PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
I know, I know, it’s not. Trickes are abound in the sleeve.
Den Sav
Den Sav Oct 08, 2019 3:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
This is not debt monetization.
Giorgi Murvanidze
Giorgi Murvanidze Oct 08, 2019 3:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what it means strong usd or ...
Jermaine .A
Jermaine .A Oct 08, 2019 3:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
He's right it's not just QE, it's QE4ever.
Giorgi Murvanidze
Giorgi Murvanidze Oct 08, 2019 3:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
what it means strong usd or ...
Jermaine .A
Jermaine .A Oct 08, 2019 3:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
maybe against other currencies, but hard assets should gain
Giorgi Murvanidze
Giorgi Murvanidze Oct 08, 2019 3:19PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
dont get me wrong my english is not so good to understand I trade Eur usd (sell) this is my last open position with big lot I need to know shoul i hold or close ?
Jon Bal
Jon Bal Oct 08, 2019 3:13PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
which part of the balance sheet?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email