by Jonnelle Mars
(Reuters) – The permanent buyback program established by the Federal Reserve this year could be open to banks until early next year, a senior New York Fed official said on Thursday.
The US central bank began accepting requests from banks this month to join the program, which allows financial institutions to borrow money on an overnight basis, and several of them have already signed up, said Lorie Logan, executive vice president of the bank. New York Fed and Open Market System Account Manager (Soma).
Currently, the facility is only open to a group of 24 Wall Street primary brokers who act as the Fed’s counterparties.
The Fed’s permanent buyback programs, including one domestic and one for foreign and international monetary authorities, are intended to provide occasional support and should not be used regularly as other tools the central bank uses to control interest rates, Logan said.
Financial companies may resort to the reverse buyback mechanism less frequently in the future if there is an increase in Treasuries issuance, which would give them more alternatives to invest their money, she said.
(by Jonnelle Mars)
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