Monetary policy normalisation: Low interest rates and the new normal
Federal Reserve Bank of Philadelphia President and Chief Executive Officer Patrick Harker believes monetary policy is in a ‘good place’, in an economy that is generally doing well, despite uncertainty about the outlook. Speaking at an OMFIF roundtable in New York, he commented that the Fed’s interventions of adding both temporary and permanent money through repurchase agreements and outright purchases of Treasuries had contributed to repo markets staying relatively calm since October.
The Fed, noted Harker, has learned the financial system needs a larger amount of reserves to function smoothly than officials once thought. He added that the central bank was considering a ‘standing repo facility’ to allow banks to quickly convert Treasury holdings into liquidity, which could presumably help limit rates surges.
Click here to read Patrick Harker’s speech.
Patrick Harker, President and CEO, Federal Reserve Bank of Philadelphia
Roc Armenter, Vice-President and Economist, Federal Reserve Bank of Philadelphia
The Federal Reserve is reverting to lowering interest rates as the US economy presents a mixed picture for policy-makers. Questions are being raised about adjusting to a ‘new normal’ and the validity of unconventional policy tools. Patrick Harker and Roc Armenter from the Federal Reserve Bank of Philadelphia discuss the Fed’s balance sheet and long-term policy normalisation.