T-bill purchases aren't policy tool - Fed's Kaplan

Friday, 11. October 2019 22:55

The Federal Reserve believes the financial system should have more reserves, Robert Kaplan said on Friday in San Francisco. The head of the Dallas subsidiary of the central bank of the United States claimed, after rate-setters unveiled the decision to buy short-term debt securities issued by the Department of the Treasury, that the program is not related to monetary policy. He mirrored recent statements from Chair Jerome Powell, who defended the move even though it adds to the expansion of the Fed's balance sheet like in quantitative easing.

In Kaplan's view, the corporate sector is "highly leveraged" in historical terms, but he brushed off the notion that it translates to systemic risks. Next year's voting member on the Federal Open Market Committee referred to domestic economic performance as "mixed" but also expressed the view that growth would reach 2% in 2019.

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