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New York Fed's John Williams backs rate-control toolkit, says it can change
Williams said the Fed supplies ample reserves to support short-term rate control and the smooth functioning of core financial markets.
New York Federal Reserve President John Williams defended the central bank’s monetary policy implementation system, saying the Fed’s current toolkit for managing short-term interest rates has proven highly effective, according to prepared remarks for a conference on the Treasury market at the New York Fed, as reported by Reuters.
Williams said supplying ample reserves to the financial system helps deliver interest rate control and supports the smooth functioning of core financial markets, adding that the framework is not fixed and can be adapted as market conditions evolve.
He argued that because financial market structure changes over time, the Fed must ensure its policy tools remain fit for purpose to carry out the necessary functions.
Reuters also noted Williams did not address the outlook for monetary policy or interest rates in his remarks and was not scheduled to take questions. The comments come as the Fed under new Chairman Kevin Warsh reviews issues including how it communicates, evaluates data, and manages its still large balance sheet, amid prior criticism of large asset holdings and reserve-based liquidity.