WASHINGTON – The US Federal Reserve could expand debt purchases, a key tool it has deployed to help the US economy recover from the Covid-19 pandemic.
The Fed’s Vice-Chairman Richard Clarida signalled that the central bank is willing to ramp up purchases of bonds – Treasury debt and mortgage-backed securities – to help support growth.
He said in a speech to the Brookings Institution, that the Fed “is committed to using all of” its “available tools – not just the federal funds rate and forward guidance, but also large-scale asset purchases” to achieve these goals.
Policymakers discussed the bond buying plan at their latest meeting earlier this month noting “the critical role they are playing in supporting the economic recovery”, he added.
The Fed already cut its benchmark lending rate to zero in March at the start of the Covid-19 pandemic, and has pledged to keep it there until inflation and employment recover, despite bond purchases totaling about US$120 billion (RM493 billion) a month.
Clarida, however, said the continued purchases keep funds in the financial system, which means households and businesses have access to credit. – AFP, November 17, 2020
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