Pressure on dollar liquidity created an urgent need for action from the US Federal Reserve (the Fed). Assuming its role as the global lender of last resort - the consequence of its position as the issuer of the international trade and reserve currency - the Fed reactivated the permanent or temporary swap agreements that it established with 14 other central banks in 2008. In order to extend the reach of its dollar supply, the Fed has also created a repo facility for the central banks of countries that do not have dollar swap agreements. The high fees charged, however, will limit take-up, depriving the markets of what could be a significant calming influence.
The measures taken by the US Federal Reserve (Fed) since 15 March have already had a major impact on the balance sheets of commercial banks resident in the United States*. Their reserves held at the Central Bank have considerably increased following their role as intermediaries for the Fed’s securities purchases, emergency loans and liquidity swaps. As in 2008-2014, the Fed’s quantitative easing policy has also created a disconnect between growth in loans and growth in deposits on banks’ balance sheets. Since most of the Fed’s securities purchases have been from non-bank agents, customer deposits have grown more quickly than loans
