The Federal Reserve announced more punishment for savers yesterday, launching another securities purchasing initiative while extending any rate relief for money market investors out to mid-2015. The Fed's statement says, "To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. `In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015."
On the so-called QE3 plan, the Federal Reserve Board of Governors' Open Market Committee comments, "To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of securities as announced in June, and it is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities. These actions, which together will increase the Committee's holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."
In other news, the Investment Company Institute announced plans for an "International Money Market Funds Summit" with a press release entitled, "International Fund Leaders Convene Money Market Funds Summit in Brussels." ICI says, "Worldwide, money market funds are drawing increased attention from legislators, securities regulators, and central bankers. To address the issue on a global scale, five major fund organisations are joining forces to host the 2012 International Money Market Funds Summit on Thursday, October 4, in Brussels, Belgium."
It explains, "The Investment Company Institute, ICI Global, European Fund and Asset Management Association, The Investment Funds Institute of Canada, and Institutional Money Market Fund Association are convening industry analysts and leaders, market participants, policymakers, and investors to address key money market fund topics, including: Value of money market funds to investors, issuers and the economy; The experience of money market funds in various jurisdictions in the 2008 financial crisis; Changes in money market fund regulations and practices since 2008; and, Assessing national and international regulatory recommendations."
The release reviews Global regulatory developments, saying, "In response to the 2007-2008 financial crisis, regulators and policymakers around the world have considered changes to money market fund regulations. For example: The Financial Stability Board asked IOSCO to conduct a consultation into money market funds globally. It released a money market fund consultation report in April 2012. IOSCO recently announced that its Board will determine IOSCO's next steps on this topic at its meeting in Madrid on 3/4 October, and will report to the G20 Finance Ministers meeting in November 2012. In Europe, in May 2010, CESR (now ESMA) published guidelines on a common definition of European money market funds to improve investor protection. The new guidelines address the challenges faced by money market funds during the financial crisis, including standards relating to portfolio quality and maturity. More recently, the European Parliament's Committee on Economic and Monetary Affairs issued a draft report on shadow banking that includes a set of somewhat controversial proposals for money market funds. Furthermore, the European Commission has issued a UCITS consultation that includes as a topic the need to strengthen money market funds. The EC is considering a more harmonized and detailed European regulatory framework for money market funds and is seeking information to better understand possible reforms. For example the EC is seeking input on capital buffers, valuation methodologies, redemption restrictions, liquidity fees, and liquidity requirements."
Note that ICI's MMF Summit features many of the same speakers and topics as the European Money Fund Summit, which Crane Data is assisting with (and which will be held Nov. 19-20 in Frankfurt, Germany), but the two events are not affiliated.