Roberto Perli, the official charged with conducting open market operations at the New York Federal Reserve, said Thursday that Treasury bill purchases intended to manage short-term liquidity are deliberately adjustable and not tied to a fixed timetable.
Perli, who manages the central bank's System Open Market Account, told attendees at a conference hosted by his regional Fed bank that reserve management purchases - commonly abbreviated as RMPs - "are not on a preset course, and the Desk can adjust amounts up or down for any given month, depending on money market conditions."
He pointed to language from the Federal Open Market Committee's mid-June meeting that made "explicit that temporary pauses in RMPs could occur if money market conditions warrant," and he said that wording "represents flexibility that the Desk could use in the future, for example if money market conditions eased again substantially."
The Fed launched RMPs in December with the objective of bolstering short-term market liquidity ahead of the mid-April tax deadline, a period that can produce notable swings in banking sector reserves. When the program began, purchases were set at $40 billion per month; since then the pace has been reduced to $10 billion per month.
Market participants have remained uncertain about the path of future purchases. Perli said the bill-buying program helped the central bank navigate tax season and played a role in maintaining firm control over interest rates.
Addressing recent developments in short-term funding markets, Perli acknowledged a degree of softness in money markets that has been driven in part by Treasury cash management. Despite that softness, he reported there was "no evidence of a material change in banks' demand for reserves."
At the same time, Perli warned that the reserves picture may shift in the near term. He said, "This month and next, money markets will have to absorb a large amount of net bill issuance; as such, money market conditions may tighten, and the reserves demand curve could shift back up." The observation implies the potential need to increase reserve management purchases if conditions warrant.
Perli also commented on the internal review of how the U.S. central bank manages its balance sheet and its rate-control framework under new Fed Chair Kevin Warsh. He said the Desk is prepared operationally to implement any changes the Committee might elect to pursue: "The Desk is well positioned to implement any changes to the balance sheet and rate control framework that the Committee might decide to pursue."
On standing repo operations, Perli said he has seen "encouraging signs" that market participants are more willing to use the facility when necessary, while acknowledging that impediments remain. He argued that centrally clearing standing repos would reduce their cost for users and, "strictly from a monetary policy implementation perspective, there are likely benefits from offering a centrally cleared version" of the operations.
Perli's remarks reaffirm the New York Fed's operational stance: reserve management is a tactical tool that can be scaled in either direction in response to evolving money market dynamics, and the Desk remains ready to adapt its balance sheet implementation if the Committee decides on structural changes under review.