NEW YORK (Reuters) - The New York Federal Reserve will further scale back the support it is providing in the overnight lending markets for cash, the central bank said Thursday.
The cap on the Fed’s daily operations in the market for repurchase agreements, or repo, will be reduced to $100 billion, from $120 billion, starting Friday.
The maximum offerings on term repo operations, which last two weeks, will be reduced on Tuesday to $25 billion from $30 billion. In March, the cap will be reduced further to $20 billion.
The Fed will continue to purchase $60 billion a month in short-term Treasury bills, a program policymakers describe as a technical adjustment aimed at increasing the level of reserves.
The U.S. central bank began intervening in money markets in mid-September, when a shortage of cash led to a spike in short-term borrowing costs. The Fed started purchasing bills in mid-October to boost reserves above the levels seen in early September, before the volatility began.
Policymakers said the long-term plan is to raise reserves to a level where the repo operations are no longer needed - a point they expect to reach around mid-year. Fed Chair Jerome Powell reiterated those plans during the press conference after the January policy meeting and in testimony before Congress this week.
Reporting by Jonnelle Marte; Editing by Sandra Maler and Diane Craft
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