NY Fed's Perli says rate control toolkit can navigate lower reserve demand

A Federal Reserve Bank of New ‌York official ⁠responsible ⁠for implementing monetary policy on Tuesday said the central bank's current ​rate control toolkit would still work in a system allowing banks ​to hold fewer reserves.

New York Fed System Open Market Account manager Roberto Perli also said the pace of future ​Treasury bill buying will be determined by ⁠market conditions.

"While ‌the current implementation framework is ​demonstrably very effective, ​there is an active public debate about ⁠the quantity of reserve supply that it entails," ​Perli said in the text of a speech ​to be delivered before a conference held by the Atlanta Fed.


"The current ample reserves implementation framework is well equipped to handle a reduction in the SOMA portfolio" if there were changes in the financial system ‌that allowed for lower levels of reserves, Perli said.

The official also said that Treasury bill ​buying the ​Fed embarked on ⁠at the close of last year to rebuild liquidity after several years of shrinking Fed holdings will be managed ​flexibly going forward. It has already been reduced from buying $40 billion per month to the current pace of $10 billion.

"We stand ready to adjust the pace of (Reserve Management Purchases) up or down as necessary," Perli said. (Reporting by Michael S. Derby; Editing by Dan Burns)