Comments from Simon Potter, executive vice-president of the Federal Reserve Bank of New York; he is head of the Markets Group which oversees domestic open market and foreign exchange trading operations.

  • Money markets remain important for policy transmission
  • Keeping control of fed funds during liftoff is priority
  • Says New York Fed market desk is ready for rate liftoff
  • Fed may need to relax $3008 on RRP cap after liftoff
  • Overnight reverse repo demand may rise at rate liftoff

Headlines on Bloomberg from Potter's speech

Full text: Money Markets and Monetary Policy Normalization

The FOMC's forward guidance on the future stance of policy has changed. In March, the Committee reaffirmed its view that the current zero to ¼ percent target for the federal funds rate remains appropriate to support continued progress toward maximum employment and price stability. Noting that economic conditions were unlikely to warrant an increase in the target range at the April meeting, it advised that such an increase could be warranted at any later meeting, depending on how the economy evolves.

Lift off is coming, ready or not!

here's more, via Reuters:

  • NY Fed's Potter says confident in smooth US rates liftoff, prepared to be flexible
  • Warns of uncertainty around degree of demand for repo (RRP) facility at tightening
  • Prepared to adjust RRP spreads; set useage caps; run repo auctions
  • Says overreliance on RRP facility could lead to financial instability
  • Fed aims to raise cap on RRP to level market deems sufficient
  • Tests show full-allotment RRP facility not needed to control rates
  • Potter sees "natural glide path" to phase out RRP, as Fed's portfolio shrinks