New York Fed Discusses Effective Operation of Monetary Policy Tools and Possibility of Resuming Treasury Purchases

The Federal Reserve's (Fed) short-term interest rate control measures are operating smoothly, and the recently paused Reserve Management Purchases (RMP) could be reactivated depending on market liquidity. Roberto Perli, SOMA manager at the New York Federal Reserve Bank, stated at the '2026 U.S. Treasury Market Conference' that the Fed's monetary policy tools are very effective. Perli assessed that the Fed maintains strong interest rate control and that bank reserves are adequately managed. Currently, the Fed operates under a 'ample reserve' system, and if reserves decrease excessively, volatility in short-term interest rates may increase. To prevent this, the Fed began Reserve Management Purchases in December of last year and conducted purchases of $40 billion per month earlier this year. Although purchases have been paused, they could resume if reserves decrease or if liquidity in the short-term funding market changes. Perli explained that the recent decision to set the scale of Reserve Management Purchases to 'zero' does not signify the end of Treasury purchases. The purpose of Reserve Management Purchases is to prevent a shortage of bank reserves and to stabilize short-term interest rates, which is different from past quantitative easing. In the future, market attention is expected to focus on the trends in the short-term funding market and bank reserves.

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