The following was the announcement by he Fed to inject reserves into the global financial system. This is a staggering number yet we still have Fed funds up at 7% this morning. The number comes close to what the total TARP bill would allow. Certainly, this places more money in the system than what would initially be applied through TARP. Yet, the dollar is rallying.
The monetary statistics is where all the action will be. Watching the Fed funds and the TED spread are more important than anything in the housing market in the short-run.
Federal Reserve Actions
The Federal Reserve announced today several initiatives to support financial stability and to maintain a stable flow of credit to the economy during this period of significant strain in global markets.
We will continue to adapt these liquidity facilities as necessary and will keep them in place as long as circumstances require.
Actions by the Federal Reserve include: (1) an increase in the size of the 84-day maturity Term Auction Facility (TAF) auctions to $75 billion per auction from $25 billion beginning with the October 6 auction, (2) two forward TAF auctions totaling $150 billion that will be conducted in November to provide term funding over year-end, and (3) an increase in swap authorization limits with the Bank of Canada, Bank of England, Bank of Japan, Danmarks Nationalbank (National Bank of Denmark), European Central Bank (ECB), Norges Bank (Bank of Norway), Reserve Bank of Australia, Sveriges Riksbank (Bank of Sweden), and Swiss National Bank to a total of $620 billion, from $290 billion previously.
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