by Calculated Risk on 12/11/2013 08:42:00 PM

Something to be aware of from Victoria McGrane And Jon Hilsenrath at the WSJ: Fed Moves Toward New Tool for Setting Rates

An experimental bond-trading program being run at the Federal Reserve Bank of New York could fundamentally change the way the central bank sets interest rates.

Fed officials see the program, known as a "reverse repo" facility, as a potentially critical tool when they want to raise short-term rates in the future to fend off broader threats to the economy.
...
"The Federal Reserve has never tightened monetary policy, or even tried to maintain short-term interest rates significantly above zero, with such abundant amounts of liquidity in the financial system," according to a draft of a new research paper by Brian Sack, the former head of the New York Fed's markets group, and Joseph Gagnon, an economist at the Peterson Institute for International Economics and a former Fed economist.

...
When it does want to raise rates, the Fed under the repo program would use securities it accumulated through its bond-buying programs as collateral for loans from money-market mutual funds, banks, securities dealers, government-sponsored enterprises and others.

The rates it sets on these loans, in theory, could become a new benchmark for global credit markets.

Thursday:
• 8:30 AM ET, 8he initial weekly unemployment claims report will be released. The consensus is for claims to increase to 325 thousand from 298 thousand last week.

• Also at 8:30 AM, Retail sales for November will be released. The consensus is for retail sales to be 0.6% in November, and to increase 0.3% ex-autos.

• At 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for October. The consensus is for a 0.3% increase in inventories.