Fed Adds $610 Million to Banking System With Repo AgreementsLiz Capo McCormick
The Federal Reserve added $610 million in reserves to the banking system when it arranged repurchase agreements as part of its readiness program.
The one-day transactions, part of a series of open-market operations that began in 2009, don’t represent any change in monetary policy, according to a statement yesterday on the Federal Reserve Bank of New York’s website.
In repos, the Fed buys securities from its 21 primary dealers for a set period, temporarily raising the amount of money available in the banking system. At maturity, the securities are returned to the dealers, and the cash to the Fed. In a reverse repo, the opposite occurs.
The Fed has historically used repos and reverse repos to help maintain the proper level of money in the banking system to keep overnight interest rates close to the central bank’s target. The Fed has held its target rate for overnight loans between banks in a range of zero to 0.25 percent since December 2008.