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Investing.com -- The Federal Reserve announced Wednesday it will halt the reduction of its $6.6 trillion balance sheet due to tightening money market liquidity conditions and declining bank reserve levels.
Starting December 1, the Fed will maintain its Treasury holdings by rolling over maturing securities, ending the previous policy that allowed up to $5 billion in Treasury securities to mature without replacement each month.
For mortgage-backed securities (MBS), the central bank will continue its plan to allow up to $35 billion to expire monthly - a target it has not reached in over three years of reductions. However, beginning December 1, all proceeds from maturing MBS will be reinvested into Treasury bills.
At its Federal Open Market Committee meeting, the Fed also reduced the federal funds rate by 25 basis points to a target range of 3.75% to 4.00%. The interest on reserve balances rate was lowered to 3.90% from 4.15%, while the reverse repo rate was cut to 3.75% from 4.00%.