MNI: Federal Reserve Issues Press Release - Text 2

By Evan Ryser

     WASHINGTON (MNI) - Decisions Regarding Monetary Policy Implementation 

     The Federal Reserve has made the following decisions to implement the

monetary policy stance announced by the Federal Open Market Committee in its

statement on March 3, 2020: 

     - The Board of Governors of the Federal Reserve System voted unanimously to

set the interest rate paid on required and excess reserve balances at 1.10

percent, effective March 4, 2020. 

     - As part of its policy decision, the Federal Open Market Committee voted

to authorize and direct the Open Market Desk at the Federal Reserve Bank of New

York, until instructed otherwise, to execute transactions in the System Open

Market Account in accordance with the following domestic policy directive: 

     "Effective March 4, 2020, the Federal Open Market Committee directs the

Desk to undertake open market operations as necessary to maintain the federal

funds rate in a target range of 1 to 1-1/4 percent. In light of recent and

expected increases in the Federal Reserve's non-reserve liabilities, the

Committee directs the Desk to continue purchasing Treasury bills at least into

the second quarter of 2020 to maintain over time ample reserve balances at or

above the level that prevailed in early September 2019. The Committee also

directs the Desk to continue conducting term and overnight repurchase agreement

operations at least through April 2020 to ensure that the supply of reserves

remains ample even during periods of sharp increases in non-reserve liabilities,

and to mitigate the risk of money market pressures that could adversely affect

policy implementation. In addition, the Committee directs the Desk to conduct

overnight reverse repurchase operations (and reverse repurchase operations with

maturities of more than one day when necessary to accommodate weekend, holiday,

or similar trading conventions) at an offering rate of 1.00 percent, in amounts

limited only by the value of Treasury securities held outright in the System

Open Market Account that are available for such operations and by a

per-counterparty limit of $30 billion per day. 

     The Committee directs the Desk to continue rolling over at auction all

principal payments from the Federal Reserve's holdings of Treasury securities

and to continue reinvesting all principal payments from the Federal Reserve's

holdings of agency debt and agency mortgage-backed securities received during

each calendar month. Principal payments from agency debt and agency mortgage

backed securities up to $20 billion per month will continue to be reinvested in

Treasury securities to roughly match the maturity composition of Treasury

securities outstanding; principal payments in excess of $20 billion per month

will continue to be reinvested in agency mortgage-backed securities. Small

deviations from these amounts for operational reasons are acceptable. 

     The Committee also directs the Desk to engage in dollar roll and coupon

swap transactions as necessary to facilitate settlement of the Federal Reserve's

agency mortgage-backed securities transactions." 

     - In a related action, the Board of Governors of the Federal Reserve System

voted unanimously to approve a 1/2 percentage point decrease in the primary

credit rate to 1.75 percent, effective March 4, 2020. In taking this action, the

Board approved requests to establish that rate submitted by the Boards of

Directors of the Federal Reserve Banks of Minneapolis and New York. 

     This information will be updated as appropriate to reflect decisions of the

Federal Open Market Committee or the Board of Governors regarding details of the

Federal Reserve's operational tools and approach used to implement monetary

policy. 

     More information regarding open market operations and reinvestments may be

found on the Federal Reserve Bank of New York's website.

--MNI Washington Bureau; +1 202 371 2121; email: evan.ryser@marketnews.com

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