THE NERVE OF THE FEDERAL RESERVE


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The U.S. spent almost $1 trillion more than it took in during 2019, a deficit not seen in seven years.

The Fed will hold a meeting this week to decide if they are injecting enough cheap money into the economy to buttress it up against the sinking economy.

Analysts expect another cut in interest rates, while liquidity operations continue.

On Monday, the Federal Reserve released $58.15 billion in overnight liquidity into the markets. 

The Fed took in $50.95 billion in Treasury bills, $6.7 billion in mortgage-backed securities, and $500 million in agencies.

On Tuesday, the Fed injected $99.9 billion in temporary liquidity – $64.9 billion in overnight repo agreements and $35 billion in repo operations that will run through 5 November – as well as $7.5 billion in permanent reserves into the financial market. 

On Thursday, the Feds confirmed their debts stood at close to $4 trillion, an increase from the $3.8 trillion before they started their repo operations.

Friday morning, eligible banks submitted $3.58 billion to the Fed in short-term securities, with the Fed reporting it bought $75 billion in T-bills. 

In total, $77.3 billion in liquidity was released into the markets: $67.6 billion in treasuries and $9.7 billion in mortgage-backed securities.

TRENDPOST: The International Monetary Fund (IMF) warned that fiscal policy could do only so much, and with corporations and financial institutions feasting on cheap money, there will be “no lifeboats” when the economy takes a dive. 

This week, Russia’s central bank issued its fourth rate cut since June. Turkey cuts its rates for the third time in four months, from 16.5 percent to 14 percent.

Yet, as per a 22 October Financial Times article, there is growing concern that low interest rates will not reboot the slowing economy: 

“There are genuinely fundamental questions about their future.” Chief among their woes is the spectre of persistently low interest rates in the eurozone. 

In September, Mario Draghi, the outgoing president of the European Central Bank, cut its key deposit rate to minus 0.5 per cent, putting further pressure on banks’ net interest income, the revenue they generate from lending. Markets expect rates to stay there or fall further after Christine Lagarde takes over.”

Indeed, the facts are in the numbers. 

As China’s economy, the second largest in the world, slows, so, too, its producer prices continue to slide and profits at Chinese industrial companies fell in September for the second straight month. 

Investment in construction projects significantly slowed from 5.5 percent to 4.7 percent in the third quarter.

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