Repo fix may be helping US stocks

NEW YORK: The Federal Reserve says that its Treasurybill buying program isn’t the same as quantitative easing. But the advance in US equity prices alongside the central bank’s growing balance sheet suggests to some that the effects may not be wildly different. The central bank, driven by the need to tamp down problems in funding markets with liquidity injections, has expanded its balance sheet from as little as $3.76 trillion at the end of August to $4.05 trillion.

That growth has, in effect, already reversed close to 40 per cent of the shrinkage that the Fed began in late 2017. To calm funding markets and improve its control over short-term interest rates, the Fed has used measures including the implementation of repurchaseagreement operations and a $60 billion per month program to acquire T-bills.