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MNI TRANSCRIPT: Powell on Liquidity

     WASHINGTON (MNI) - The following is the portion of a transcript from
Federal Reserve Chairman Jerome Powell's press conference after the FOMC meeting
     Q: The Fed balance sheet, you all recently resumed purchases of treasury
bills. Is wondering how long do you expect that to continue and given the fact
that the repo operation it is seems like the Fed is having to increase the
amount of temporary liquidity that it is injecting in to the system. Do you feel
like it is just that there is not enough reserves in the system. Do you have a
good sense of what's is going on there?
     A: We expect bill purchase to continue in to the second quarter of next
year. Through January. In terms of the causes, so there is a lot of forensic
work going on by us and by market participants and all kinds of analysts. And,
you know, one thing is that we think we need reserves to be back up to the
level, the minimum level of reserves that we can have during the various
fluctuations that you see with reserves is something like 1.45 trillion or a
little higher. And that's the level in early September. So we are going to be
adding reserves to get back to that place. That's one thing. There are also it
may be -- one thing that was surprising about the episode was that liquidity
didn't seem to flow as one might have expected. We had surveyed the bajs
carefully about what was their lowest comfort level of reserves and many banks
that were well above that level did not take that excess cash and invest it in
the repo market at much higher rates. They didn't do that. And so the question
is why and are there things that we can do that would -- adjustments that we
could make that would allow liquidity to flow more easily in the system without
sacrificing safety or soundness. Those are not things that can happen -- that
can -- really address the situation in the short term but those are a range of
things this we are looking at as well.
--MNI Washington Bureau; +1 202 371 2121; email: