NY Fed's Perli says monetary policy toolkit working very well

The Federal Reserve’s monetary policy control ​toolkit continues to be very effective, Roberto Perli, a ​New York Fed official responsible for implementing ‌short-term ​interest rate policy for the central bank, said on Tuesday.

“We have maintained very strong interest rate control, we have kept reserves within the ample range, and our Treasury ‌bill purchases have run smoothly,” Perli said. He is manager of the New York Fed’s System Open Market Account. His comments came from closing remarks at an event held by the New York Fed on Treasury market issues. Perli leads the technical implementation ‌of monetary policy to achieve the Fed’s employment and inflation mandates.

He also said recent central bank actions to ‌add liquidity to the financial system, which are currently paused, are not a preset course, suggesting the Fed could again buy Treasury bills if it thought it needed to bolster market liquidity. He also said so-called Reserve Management Purchases of Treasury bills will be adapted to market liquidity needs. When ⁠it comes ​to Treasury bill buying, “the ⁠recent decisions to set them at zero are no different in spirit than any of the other decisions the Desk has made since RMPs ⁠started in December of last year,” Perli said.

The Fed had been buying bills in large quantities to bolster market liquidity levels and to ​ensure firm control over the federal funds target rate range, the institution’s main tool to achieve its policy ⁠goals. It stopped buying recently after concluding the market had the needed amount of liquidity. The buying had been technical in nature and was not ⁠designed ​to provide stimulus to the market, even as the purchases increased the overall size of the Fed’s balance sheet. Perli said in his remarks that the New York Fed has a handle on the factors that govern the RMPs.

The ⁠New York Fed “process for forecasting reserves is robust and generally quite accurate,” Perli said, adding “forecast misses over the past four ⁠years represent a very small ⁠fraction of total reserves supply and are easily accommodated by our ample reserves framework.” Perli also said in his remarks that “strictly from a monetary policy implementation perspective, offering a centrally cleared version ‌of our standing ‌repo operations would offer some clear benefits.”