The Federal Reserve is on pace to pump what could be a record high $1.1 trillion in the U.S. financial system Friday as it continues to provide liquidity to markets at home, and around the world, as the cornavirus pandemic threatens to trigger a global recession.
The Fed is slated to buy around $107 billion in government bonds and mortgage backed securities Friday as part of the $700 billion QE revival it unveiled last week after cutting interest rates to a record low range of between 0% and 0.25%. It's also providing two overnight repo operations that will inject a further $1 trillion in cash -- in exchange for similar amounts in collateral -- to ensure banks continue to lend to one another during the ongoing crisis in global finance and what is likely to be a pending U.S. recession.
In fact, the Fed also said Friday that it would run the $1 trillion overnight repo operation on a daily basis until at least the end of the month.
"We are encouraged by the Fed's willingness genuinely to do whatever it takes to keep markets functioning, and to do it quickly," said Ian Shepherdson of Pantheon Macroeconomics. "But we have to repeat that the Fed cannot prevent an economic catastrophe in the second quarter, and perhaps beyond, just by keeping markets running smoothly."
