The Federal Reserve has announced an open-ended commitment to quantitative easing to support the U.S. economy. This unprecedented move aims to ensure market liquidity and the effective transmission of monetary policy. The Fed will purchase Treasury securities and agency mortgage-backed securities in the amounts needed to support smooth market functioning.
In a historic move, the Federal Reserve announced an open-ended quantitative easing (QE) program, signaling its commitment to supporting the U.S. economy amidst ongoing economic uncertainty. The central bank will purchase Treasury securities and agency mortgage-backed securities “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.”
This action effectively removes any previously stated limits on the Fed’s asset purchases, marking a significant escalation in its efforts to combat the economic fallout. The Fed also reinstated the Term Asset-Backed Securities Loan Facility (TALF) to support the flow of credit to consumers and businesses.
Key Measures Announced:
- Unlimited Quantitative Easing: Purchases of Treasury securities and agency mortgage-backed securities without a specified limit.
- Commercial Paper Funding Facility (CPFF): Supporting the flow of credit to businesses.
- Primary Dealer Credit Facility (PDCF): Providing liquidity to primary dealers.
- Money Market Mutual Fund Liquidity Facility (MMLF): Assisting money market funds in meeting redemption requests.
- Term Asset-Backed Securities Loan Facility (TALF): Supporting the issuance of asset-backed securities and the flow of credit to consumers and businesses.
These measures are designed to ensure that credit continues to flow to households and businesses, supporting economic activity and employment. The Fed stated it will continue to closely monitor market conditions and is prepared to adjust its plans as warranted.