Hidden Intervention: Political Motivations Driving Fed Policy

The recent move by the Federal Reserve to increase support for the overnight lending market further informs our understanding of monetary manipulation that has characterized the last decade. Although the putative reason for the recent intervention is to support the overnight lending market, political motivation appears to have played a significant role in the decision. The operation provides increased support by the Fed to the market for U.S. Treasuries while hiding the effects of the intervention.