Search Results
Discussion Paper
Dropping Like a Stone: ON RRP Take-up in the Second Half of 2023
Take-up at the Overnight Reverse Repo Facility (ON RRP) has halved over the past six months, declining by more than $1 trillion since June 2023. This steady decrease follows a rapid increase from close to zero in early 2021 to $2.2 trillion in December 2022, and a period of relatively stable balances during the first half of 2023. In this post, we interpret the recent drop in ON RRP take-up through the lens of the channels that we identify in our recent Staff Report as driving its initial increase.
Report
Monetary Policy Implementation with an Ample Supply of Reserves
We offer a parsimonious model of the reserve demand to study the trade-offs associated with various monetary policy implementation frameworks. Our model considers a reserve demand function that encompasses banks' preferences for reserves in the post 2007-2009 financial crisis world and incorporates shocks to the demand for and the supply of reserves. We find that the best policy implementation outcomes are realized when reserves are somewhere in between scarce and abundant. This outcome is consistent with the Federal Open Market Committee's 2019 announcement to implement monetary policy in a ...
Speech
Money Markets and the Federal Funds Rate: The Path Forward
Remarks at the MFA Outlook 2019, New York City.
Speech
Implementing Monetary Policy: What’s Working and Where We’re Headed
Remarks at the National Association for Business Economics (NABE) Annual Meeting.
Discussion Paper
Measuring the Ampleness of Reserves
Over the past fifteen years, reserves in the banking system have grown from tens of billions of dollars to several trillion dollars. This extraordinary rise poses a natural question: Are the rates paid in the market for reserves still sensitive to changes in the quantity of reserves when aggregate reserve holdings are so large? In today’s post, we answer this question by estimating the slope of the reserve demand curve from 2010 to 2022, when reserves ranged from $1 trillion to $4 trillion.
Speech
Current Issues in Monetary Policy Implementation
Remarks before the Money Marketeers of New York University, New York City.
Discussion Paper
A New Set of Indicators of Reserve Ampleness
The Federal Reserve (Fed) implements monetary policy in a regime of ample reserves, where short-term interest rates are controlled mainly through the setting of administered rates, and active management of the reserve supply is not required. In yesterday’s post, we proposed a methodology to evaluate the ampleness of reserves in real time based on the slope of the reserve demand curve—the elasticity of the federal (fed) funds rate to reserve shocks. In this post, we propose a suite of complementary indicators of reserve ampleness that, jointly with our elasticity measure, can help ...
Working Paper
Monetary Policy Implementation with Ample Reserves
We offer a parsimonious model of the reserve demand to study the tradeoffs associated with various monetary policy implementation frameworks. Prior to the 2007–09 financial crisis, many central banks supplied scarce reserves to execute their interest-rate policies. In response to the crisis, central banks undertook quantitative-easing policies that greatly expanded their balance sheets and, by extension, the amount of reserves they supplied. When the crisis and its aftereffects passed, central banks were in a position to choose a framework that has reserves that are (1) abundant—by ...
Speech
The Evolution of the Federal Reserve’s Monetary Policy Implementation Framework
Remarks at the New York Fed – Columbia SIPA Monetary Policy Implementation Workshop, Federal Reserve Bank of New York, New York City.
Discussion Paper
Tracking Reserve Ampleness in Real Time Using Reserve Demand Elasticity
As central banks shrink their balance sheets to restore price stability and phase out expansionary programs, gauging the ampleness of reserves has become a central topic to policymakers and academics alike. The reason is that the ampleness of reserves informs when to slow and then stop quantitative tightening (QT). The Federal Reserve, for example, implements monetary policy in a regime of ample reserves, whereby the quantity of reserves in the banking system needs to be large enough such that everyday changes in reserves do not cause large variations in short-term rates. The goal is ...