As the Federal Reserve is preparing to issue new $75 billion of bonds, many economists believe the central bank will stop issuing its benchmark $1.20 trillion of bonds in the coming months.
It’s possible that the Fed could issue a smaller amount of bonds with interest rates below the benchmark rate, according to people familiar with the matter.
The Fed has not indicated that it is considering that option, and many investors have expressed concern that the central banks future decisions could affect them and their portfolios.
The Fed has issued nearly $1 trillion of debt in the past three months, most of it to banks and other financial institutions.
The central bank is expected to issue another $1 billion of debt on Tuesday.
The Fed, which is in its sixth month of bond-buying programs, said it is making progress on its plan to print $1,000 trillion of new bonds, with the latest issuance of about $40 billion of those bonds.
While the bond market is not expecting the Fed to issue more bonds, the Fed has already begun printing cash, increasing the size of its holdings of bank deposits, which could help boost the economy.
The Federal Reserve Bank of New York, which oversees the money market funds that finance the central banking system, said Tuesday that it will begin buying bank deposits in the next few weeks.
Even before Tuesday’s $40-billion increase, the central bankers plan to buy $2.5 trillion of bank debt.
The Treasury Department will also begin buying $2 trillion of the debt of private banks, according the people familiar.
The plan is to buy the $2 billion in government debt, $500 billion in corporate debt and $500 million in bond-backed securities.
Although some central bankers have indicated they may be open to printing more debt, they have been reluctant to do so until they are confident that the economic recovery is strong enough to justify it.
Ahead of Tuesday’s announcements, Treasury Secretary Steven Mnuchin said that the U.S. economy is not yet strong enough that he would want to use the Fed’s new stimulus plan to borrow money.
“There’s still a lot of slack in the economy, but there’s certainly enough slack that we think it’s time to ramp up our economic growth,” Mnuchin told CNBC’s “Squawk Box.”
“I think the U