Fed Interventions in US Default Scenario in Focus as Debt Deadline Nears
- Yellen hasn’t said what happens after Treasury passes X-date
- Fed could halt bond runoff, inject liquidity, but no overdraft
The Marriner S. Eccles Federal Reserve building in Washington, DC.
Photographer: Andrew Harrer/BloombergThis article is for subscribers only.
Evidence that Federal Reserve policymakers recently discussed potential interventions in markets after any default by the US Treasury is reviving analysis of the central bank’s menu of options to shore up the financial system.
While Fed officials have sought to distance themselves from the partisan standoff over raising the debt limit, “they can’t be fully insulated because they have a duty to protect the economy and market function, as well as being Treasury’s fiscal agent,” LH Meyer/Monetary Policy Analytics economists wrote in a note this week.