NY Fed's Williams' Symposium Speech
An Editor's Note explains, "New York Fed President John C. Williams prepared the following remarks for delivery on Thursday, June 25 at the Crane's Money Fund Symposium. President Williams was not able to participate in the event, and the speech was not delivered publicly. We have published the text of his remarks here at the originally scheduled time." The text of the speech, "The Strategy and the Goals," states, "It's an exciting time here in New Jersey. Just 10 miles away, more than 80,000 soccer fans are packed into MetLife Stadium for the World Cup. In fact, the match is set to start in about 20 minutes -- just as Pete will be grilling me about the U.S. economy and monetary policy. I can assure you that our conversation will be even more thrilling than the game. The seats are cheaper, too. Today I'm going to talk about how the Federal Reserve is working to achieve its dual mandate goals of maximum employment and price stability. I'll also spend some time talking about how the Fed implements monetary policy." Williams says, "Given the elevated level of inflation, it is imperative that we restore it to our 2 percent longer-run goal on a sustained basis. The current stance of monetary policy is well positioned to do that. Accordingly, at its meeting last week, the FOMC decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent in support of the Fed's dual mandate." He later explains, "These administered rates help establish a floor and a ceiling for the federal funds rate. One, the interest rate on reserve balances, is the tool that helps set the floor, and another, the overnight reverse repo -- or ON RRP -- is the tool that reinforces it. Usage of the ON RRP adjusts automatically to market conditions, rising and falling with supply and demand, which is particularly important in a dynamic market. It has proven to be a very effective and flexible tool to support interest rate control to the downside." Williams adds, "The Fed's standing repo operations -- or SRPs -- help establish a ceiling for the federal funds rate. The SRP rate is set at the top of the FOMC's target range for the federal funds rate and provides interest rate control to the upside. This combination of an ample supply of reserves and an SRP rate at the top of the target range reduces the day-to-day reliance on these operations -- except during periods of significant upward pressure on rates that result from strong liquidity demand or market stress. By ensuring that adequate liquidity will be available in a wide variety of circumstances, SRPs are a critical tool used to cap temporary upward pressure on rates. It assures markets of effective interest rate control and smooth market functioning." See also from our recent Money Fund Symposium, "The Fed's Balance Sheet and Desk Money Market Operations from Dina Marchioni, Director of Money Markets at the New York Fed.
