Fed extends, but doesn’t increase, Treasury purchase program

August 12, 2009

From the FOMC statement released a few minutes ago by the Fed:

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period. As previously announced, to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve is in the process of buying $300 billion of Treasury securities. To promote a smooth transition in markets as these purchases of Treasury securities are completed, the Committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October.

The Treasury purchase program had been scheduled to terminate in September.  Instead of letting the program wind down on schedule, buying $47 billion worth of Treasuries over the next six weeks, the Fed will make those purchases over the next 10 weeks.

So far the Fed has purchased $253 billion worth of Treasuries, $109 billion worth of agency debt, and $721 billion of agency mortgage-backed securities.

The other two purchase programs, for agency debt and agency mortgage-backed securities, are unchanged.  As reiterated in the statement, they are scheduled to expire at the end of the year.

IMHO, these programs can’t end soon enough…

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[...] Fed extends timeline of Treasury purchase program, no increase: (Rolfe Winkler, Reuters), “So far the Fed has purchased $253 billion worth of Treasuries, $109 billion worth of agency debt, and $721 billion of agency mortgage-backed securities.” [...]

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