Federal Reserve Pauses U.S. Treasury Purchases for Second Consecutive Month

On September 15, the Federal Reserve announced that it will not conduct U.S. Treasury bond purchases for reserve management purposes for the second consecutive month in the upcoming cycle, indicating that policymakers believe the current level of bank reserves in the financial system is appropriate. The New York Fed's Open Market Trading Desk plans to refrain from reserve management purchases during the monthly cycle ending October 14, but still intends to carry out approximately $15.6 billion in reinvestment purchases. The decision to pause reserve management purchases reflects the Fed's confidence in the functioning of the funding markets, ensuring that the Secured Overnight Financing Rate (SOFR) has remained near or below the Interest on Reserve Balances (IORB) level for most of the past month. Meanwhile, the U.S. Treasury has reduced the supply of Treasury bills ahead of the quarterly tax deadline, a change that does not indicate a shift in the Fed's monetary policy or balance sheet strategy.

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