MNI POLICY: Fed's Williams: Can Adjust Bill Buying As Needed

By Jean Yung

     WASHINGTON (MNI) - The Federal Reserve may adjust as needed its recently

announced plan to purchase $60 billion of Treasury bills a month for the next

six months, New York Fed President John Williams said Thursday.

     The bill purchases do not represent any change in the stance of monetary

policy and "the goal is to make sure that the federal funds rate stays within

the target range set by the FOMC," he said.

     "We will continue to learn about demand for reserves and other Federal

Reserve liabilities and market functioning, and may adjust the specifics of the

plan as appropriate," he said in remarks prepared for a financial market

conference in New York. 

     The supply of bank reserves "appeared ample during the summer and into

early September," Williams said, but money market conditions became highly

volatile on Sept. 16 and 17. 

     Corporate tax payments and the settlement of newly issued Treasury

securities put upward pressure on short-term rates, but "the size of the

reaction in repo rates, the spillover to the federal funds market, and the

emergence of strains in market functioning were outside of recent experience,"

he said. 

     The Fed's subsequent open market operations, which continue to this day,

"had the desired effect of reducing strains in markets," he said. 

     The Fed's bill buying plan will bring the underlying level of reserves to

"a level consistent with the ample reserves framework on a sustained basis," he

said. 

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

[TOPICS: MMUFE$,M$U$$$,M$$FI$,MN$FI$,MN$FX$,MN$MM$,MN$RP$]