Link:
http://www.cnbc.com/id/36196300
Specific part:
Fed Considering Policy Shift on Treasurys
For those economic techno boffins on this forum what does this mean????
If the allow the bonds to be 'rolled' off, does that mean using cash to pay for it? If so how does this reduce reserves from the banking system?
Its just creating cash to pay for debt isnt it?
In order words, by different means, the Fed is still acting in an expansionary manner. And the article doesnt make sense, because its not removing any stimulus from the economy, its just replacing bonds with cash.
What am i failing to understand.
Help please.
http://www.cnbc.com/id/36196300
Specific part:
Fed Considering Policy Shift on Treasurys
The Federal Reserve is considering allowing maturing Treasury bonds to roll off its portfolio as an alternative way to drain reserves from the banking system, according to minutes from its March meeting.
The move would mark a shift from the current policy of reinvesting the proceeds from government debt into new Treasury bonds as the old ones come due.
This would serve as an additional tool for removing the extraordinary stimulus the Fed injected into the banking system in response to the worst financial crisis since the Great Depression.
"Redeeming all of its maturing Treasury holdings would significantly reduce the size of the Federal Reserve's balance sheet over coming years and hence could be helpful in limiting the need to use other reserve draining tool such as reverse repurchase agreements," the minutes said.
For those economic techno boffins on this forum what does this mean????
If the allow the bonds to be 'rolled' off, does that mean using cash to pay for it? If so how does this reduce reserves from the banking system?
Its just creating cash to pay for debt isnt it?
In order words, by different means, the Fed is still acting in an expansionary manner. And the article doesnt make sense, because its not removing any stimulus from the economy, its just replacing bonds with cash.
What am i failing to understand.
Help please.