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Original title: Fed quantitative bond purchase, can not say quantitative easing
The Fed's purchase of US Treasury bonds will last at least nine months. This is expected to increase by more than $ 540 billion. With such a large dollar entering the market, the impact of its side effects on the global money market will be obvious.
On October 11, the Fed announced it would buy $ 60 billion in short-term treasury bonds each month, starting October 15, to rebuild its balance sheet and avoid a repeat of the currency market turmoil in September.
Looking at this news and analyzing it carefully, the reason the Fed buys government bonds has some credibility. Because, although after two interest rate cuts, the current Fed interest rate target range remains stable at 1.75% -2%, the money market is still in a "deficit" state last month due to factors such as overlapping US corporate tax payments and US purchase agreements. This has led to a sharp rise in short-term interest rates in the US currency market. For this reason, the Fed's purchase of government bonds to increase money market liquidity supply may alleviate excessive growth in money market interest rates to some extent, which is conducive to stabilizing the interest rate of the euro. money market and benefit from the supply of funds to US industrial and commercial companies. To avoid excessive increase in the cost of capital. If we simply consider this factor, the Fed's purchase of US Treasury securities appears to be somewhat rational.
However, because of this superficial factor, the motivation behind the analysis will reveal that the Fed's currency operation to buy government bonds has indeed evolved into a disguised quantitative easing policy, although Fed monetary authorities do not recognize this objective. Facts. Fed Chairman Powell believes the Fed will resume buying US Treasuries, mainly to prevent the recurrence of the recent currency market turmoil. Powell said the purchase will consist of national debt. Powell also said that this should not be considered a quantitative easing policy implemented by the Federal Reserve in response to the crisis to promote the economy ten years ago. Powell also emphasized that balance sheet expansion for reserve management purposes should never be confused with the large-scale asset purchase program implemented by the United States following the financial crisis. Whether it is a recent technical issue or a government bond purchase measure that the United States is considering addressing these issues, it should not have a material impact on the stance of monetary policy, which is by no means a relaxation. quantitative.
Certainly, Powell may not want to be subject to quantitative easing of the US dollar because of the purchase of US Treasury bonds and does not want to change the stance of US monetary policy. However, ideals are always ideals. Many things do not always evolve according to predefined goals. The Fed's purchase of domestic debt will inevitably lead to a loosening of monetary policy, which will inevitably lead to some degree of dollar proliferation.
First, if the Fed buys US Treasury bonds or Treasury bonds, it will inevitably require real money and silver. The Fed itself cannot count on surplus assets to buy. It can only increase the amount of US dollar currency issued for purchase. It will undoubtedly increase the value of the dollar currency to the market objectively. Invisibly aggravating the impact of the dollar currency on the market furthermore, the result is likely to lead to a depreciation of the dollar and a drop in the dollar exchange rate, which in turn will lead to the overall depreciation of dollar assets and the decline in dollar bond yields. The money is rampant.
Second, the Fed's purchase of US Treasury bonds is relatively long. It is not a short-term, small-scale purchase, but a huge one. The amount of dollars invested is huge and will have a bigger impact on the dollar market. The large effect of the depreciation of the dollar may even cause fluctuations in the global money market, which the Fed itself may not control.
According to a statement issued by Washington, the Fed said its actions to buy US Treasury bonds "will continue at least until the second quarter of next year." In addition, a daily overnight buyback operation and two 14-day buyback operations will be implemented, which will last at least until January 2020 to ensure adequate reserves, even during peak demand periods. As a result, the Fed's purchase of US Treasury bonds will last at least nine months. This is expected to increase by more than $ 540 billion, based on the October 11 exchange rate ($ 7.0868), which is equivalent to RMB38,269. 100 million yuan. With such a large dollar entering the market, the impact of its side effects on the global money market will be obvious.
In short, the Fed's purchase of US Treasury securities, regardless of whether the Fed's monetary authority subjectively admits quantitative dollar easing, objectively has the typical characteristics of quantitative dollar easing, is a disguised quantitative easing behavior against the US dollar. US dollar and the global money market. Both will have a big impact, and the Fed needs to think twice before acting.
Mo Kaiwei (Financial Reviewer) Editor Wang Shijun Ren Yiqing Reviewing Liu Jun
Editor in charge: Wei Yu