US Treasury doubles long-term bond purchase operations, potentially complicating the Fed's efforts to achieve price stability
MacroDigital Finance Impact 4
The US Treasury announced on the 19th that it will double the size of its long-term bond purchase operations, a move that could complicate the Federal Reserve's efforts to achieve price stability under Chair Warsh. The measure comes in response to a sharp rise in long-term borrowing costs that is adversely affecting credit conditions across the global economy, raising questions about whether the Fed or the Treasury has greater influence over overall credit conditions. David Russell, global head of market strategy at TradeStation, noted that Treasury Secretary Bessent's action could shift the center of gravity from the Fed to the Treasury. Meanwhile, Gennadiy Goldberg, head of US rates strategy at TD Securities, said the bar is currently very high for the Fed to join in market-stabilizing purchases. Michael Feroli, chief US economist at JPMorgan, expressed the view that the Fed's ability to control short-term interest rates is unaffected.
