MNI POLICY: Williams Says China Mini Deal Unlikely To Sway Fed

-- Says Fed Needs To Do Market Outreach On Repo Regulations, Supervision

By Evan Ryser

     SAN FRANCISCO (MNI) - New York Federal Reserve President John Williams said

Thursday he does not believe a phase one trade deal with China would move the

Fed from standing pat at the December FOMC meeting. 

     "For me, it is not about the ups and downs in a given day or even within a

given day around negotiations, on trade, or Brexit, or anything else. Because

those shift around quite a bit," Williams said when taking questions at the San

Francisco Fed's 2019 Asia Economic Policy Conference. 

     Williams said the Fed will "focus on its long game," as monetary policy

changes start "having its full effect after a year or two and we don't ever want

to get caught up in the high frequency changes." 

     "Even if there is some kind of resolution on a particular issue, I think

this uncertainty factor which we are hearing from everywhere, business people

across the country, is unlikely to turn on a dime," Williams said. 

     "Monetary policy should not be overly influenced by any specific

development. We want to take the longer view."

     --REPO MARKETS 

     Williams echoed comments from other Fed leaders saying added liquidity has

helped but said the "deeper question" is whether the repo markets are

functioning effectively and whether liquidity is moving between these markets in

a given day. 

     Asked about stresses in the repo markets that spiked in mid-September,

Williams said the Fed's response to buy T-bills beginning at $60 billion a month

showed "clearly the level of reserves did affect the liquidity in the market." 

     Williams said the Fed will do further research and analysis to see how

resilient it is and how it adjusts to shocks. "We are going to need to do a lot

of work with the industry thinking about whether it is how regulations and

supervision affect liquidity in these markets, but also how the institutional

structures matter."

     "It needs to be high on our list of things that we are working on." 

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

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