Lorie K Logan: Impact of abundant reserves on money markets and policy implementation

Remarks (via videoconference) by Ms Lorie K Logan, Executive Vice President in the Markets Group of the Federal Reserve Bank of New York, at the Securities Industry and Financial Markets Association (SIFMA) Webinar, 15 April 2021.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
15 April 2021

As prepared for delivery


Thank you for the invitation to speak at this SIFMA event. It is a pleasure to be back with you to discuss financial markets and monetary policy implementation. When I last spoke with this group in July of last year, I shared my views on the marked deterioration in conditions in the U.S. Treasury and agency mortgage-backed securities (MBS) markets at the onset of the COVID-19 pandemic, and the Federal Reserve's asset purchases undertaken to support market functioning.

Asset purchases are ongoing and continue to help foster smooth market functioning and accommodative financial conditions, supporting the flow of credit to households and businesses. This expansion in the Federal Reserve's assets also has the effect of increasing Federal Reserve liabilities-particularly reserve balances-which can have important implications for money markets. Today, I would like to discuss the recent rapid expansion in reserves, and its influence on money market conditions. I plan to share some perspective on how, in this environment, the Federal Reserve's tools will help maintain the federal funds rate well within the target range and support effective policy implementation.

Before I continue, let me note that the views I express today are my own, and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.