New York Fed says monetary policy toolkit remains effective as bill purchases pause

  • Roberto Perli said the Federal Reserve's monetary policy implementation toolkit remains effective.
  • Treasury bill purchases were recently set at zero after liquidity reached the required level.
  • Reserve Management Purchases began in December of last year and are adjusted to liquidity needs.

The Federal Reserve's monetary policy implementation framework remains effective, Roberto Perli, the New York Fed official responsible for implementing short-term interest-rate policy, said Sept. 22. Perli, manager of the New York Fed's System Open Market Account, said the central bank has maintained strong control of interest rates, kept reserves in the ample range and conducted Treasury bill purchases smoothly. He said recent liquidity operations are currently paused but are not governed by a preset course, leaving room for the Fed to resume Treasury bill purchases if market liquidity requires it. Reserve Management Purchases, or RMPs, will be adjusted to liquidity conditions rather than treated as a fixed program. The purchases were intended to support market functioning and maintain firm control of the federal funds target range, not to stimulate the economy, although they expanded the Fed's balance sheet. Perli also said the New York Fed's reserve forecasting process is robust and that a centrally cleared version of its standing repo operations could offer clear benefits.

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