Williams estimates tariffs have added 0.5 to 0.75 percentage points to the current 3 percent inflation rate. [2]
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“My current estimate is that, to date, the increase in tariffs has contributed around one half to three quarters of a percentage point to the current inflation rate of about 3 percent.”
Williams expects inflation around 2.75 percent this year, reaching 2 percent target in 2027. [3]
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“And with various short-term factors affecting prices, I expect overall inflation to come in at around 2-3/4 percent this year, before reaching our longer-run 2 percent target in 2027.”
Williams expects inflation to fall to 3.25 percent by year-end, reaching 2 percent target in 2028. [2]
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“For the reasons I outlined a moment ago, I expect overall inflation to decline to around 3-1/4 percent by year-end, then continue on a glide path toward our 2 percent goal in 2027 and land on target in 2028.”
Williams forecasts inflation at 3 percent in 2026, returning to 2 percent target in 2027. [3]
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“Looking ahead, my base case is for inflation to be about 3 percent this year, before dropping to our 2 percent target in 2027 as the effects of tariffs and energy prices move into the rearview mirror.”
Williams estimates tariffs have added 0.5 to 0.75 percentage points to the current 3 percent inflation rate. [2]
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“My current estimate is that, to date, the increase in tariffs has contributed around one half to three quarters of a percentage point to the current inflation rate of about 3 percent.”
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1
Williams says ample reserves lie between $1.5 trillion and the current $3.2 trillion level. [1]
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“As I said, it’s hard to estimate exactly what constitutes an ample level of reserves. We know that number is lower than the current $3.2 trillion, since market indicators still point to reserves remaining abundant.”
Williams says Treasury expects TGA balances could peak around $1.025 trillion by late April, drawing down reserves. [3]
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“Treasury recently estimated that TGA balances could peak around $1.025 trillion by late April, amid tax season inflows, likely resulting in a notable drawdown in reserves.”
Williams expects inflation around 2.75 percent this year, reaching 2 percent target in 2027. [2]
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“And with various short-term factors affecting prices, I expect overall inflation to come in at around 2-3/4 percent this year, before reaching our longer-run 2 percent target in 2027.”
Williams says FOMC ended balance sheet runoff December 1 and began reserve management purchases in December 2025. [2]
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“First, having determined that reserve balances were approaching the ample range, at its October 2025 meeting it decided to conclude the runoff of aggregate SOMA securities holdings effective December 1; and second, when it judged that reserves declined to the ample range in December, it instructed the Desk to begin reserve management purchases (RMPs) to maintain reserves within that range.”
Williams forecasts GDP growth of 2 to 2.25 percent with unemployment declining to 4 percent by 2028. [2]
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“With growth running modestly above my estimate of its potential rate of 2 percent, I expect the unemployment rate to edge down very gradually to 4 percent in 2028.”
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Quoted in printen.wikipedia.org
“the score used all kinds of effects for piano, percussion, and strings. It had a debt to Varèse , whose music enormously interested me. If I had never written film scores, if I had proceeded writing concert music, it might have been in this vein”
American composer and conductor (born 1932) · Contributors to Wikimedia projects
Quoted in printen.wikipedia.org
“. At the invitation of producer Martin Lewis , he created a highly acclaimed classical-rock fusion duet with rock guitarist Pete Townshend of the Who on Townshend's anthemic ”
Australian classical guitarist (born 1941) · Contributors to Wikimedia projects
Quoted in printen.wikipedia.org
“ theme (used by NBC News and Seven News in Australia) and PBS 's Great Performances . [ 10 ] [ 11 ]
Williams received the Kennedy Center Honor in 2004, the National Medal of the Arts in 2009 and the AFI Life Achievement Award in 2016. [ b ] He was inducted into the Songwriters Hall of Fame in 1998, the Hollywood Bowl 's Hall of Fame in 2000 and the American Classical Music Hall of Fame in 2004. In 2022 , Williams was awarded an honorary knighthood by Queen Elizabeth II , ”
American composer and conductor (born 1932) · Contributors to Wikimedia projects
Quoted in printen.wikipedia.org
“. The piece originally included only the first few bars of the tune as it is known today, but at Williams' request Myers rewrote and expanded it into the better-known guitar arrangement. After this transformation, it was used for a film, The Walking Stick , in 1970. In 1973, Cleo Laine wrote lyrics and recorded it as the song ”
American composer and conductor (born 1932) · Contributors to Wikimedia projects
Quoted in printen.wikipedia.org
“. [ 12 ] The American Film Institute included three of his scores on its AFI's 100 Years of Film Scores : Jaws , E.T. and, in first place, Star Wars . His career was chronicled in the Disney+ documentary Music by John Williams (2024).
John Towner Williams was born on February 8, 1932, in Queens , New York City, [ 13 ] to Esther (née Towner) and Johnny Williams , [ 14 ] a jazz drummer and percussionist who played with the Raymond Scott Quintet. He has an older sister, Joan, [ 14 ] and two younger brothers, Jerry and Don, who play on his film scores. [ 14 ] Williams said of his lineage: ”
American composer and conductor (born 1932) · Contributors to Wikimedia projects
Transcript excerptNY Fed speeches
“In-person presentation for the Rockland Business Association’s General Membership Luncheon, delivered by Kartik Athreya, Director of Research and Head of the Research and Statistics Group, Federal Reserve Bank of New York.”
“In-person keynote presentation at the Economic Outlook Breakfast 2026 & Beyond event, delivered by Kartik Athreya, Director of Research and Head of the Research and Statistics Group, Federal Reserve Bank of New York.”
“In-person keynote presentation for the 62nd Annual Arizona State University/PNC Bank Economic Forecast Luncheon, delivered by Kartik Athreya, Director of Research and Head of the Research and Statistics Group, Federal Reserve Bank of New York.”
“at that time stock exchange floors were loud places crowded with people and paper, Paul Volcker was the Federal Reserve chairman, having helped steer the country out of a period of high inflation, and a single European currency remained just an idea.”
“After more than three years of balance sheet reduction, the FOMC ended runoff last fall, then determined in December that reserves had reached ample levels, consistent with the principles and plans it had outlined in 2022.”
“This forum comes at a critical time of transition, with the U.S. Treasury market preparing for expanded central clearing, potential changes in regulation, and likely growth in Treasury supply.”
“First, having determined that reserve balances were approaching the ample range, at its October 2025 meeting it decided to conclude the runoff of aggregate SOMA securities holdings effective December 1; and second, when it judged that reserves declined to the ample range in December, it instructed the Desk to begin reserve management purchases (RMPs) to maintain reserves within that range.”
“Looking through the downs and ups in the data, growth in the first half of the year was about 1-1/2 percent, well below last year’s 2-1/2 percent pace.”
“The productivity slowdown of the 1970s contributed to stagflation. And the productivity boom of the late 1990s and early 2000s was a contributing factor to that decade’s economic prosperity with low inflation.”
“since the formal adoption of the current ample reserves framework in January 2019, the effective federal funds rate has been outside of the target range on only one day, in September 2019 ( Panel 1 ).”
“Our regular engagement is critical because the interconnected nature of global financial markets and economies means events in one country could rapidly spill over to impact others. By engaging with the offices, we build trust.”
“Based on granular analysis of the data in hand, we can draw a few conclusions. First, the tariffs have been overwhelmingly borne by domestic businesses and consumers, rather than by foreign producers.”
“Treasury repo rates later notably declined, falling as low as 15 basis points below the interest rate on reserve balances (IORB) in mid-May, though they have since rebounded.”
“Research by New York Fed economists found that over recent years, higher-income households and homeowners have experienced substantially stronger consumption growth than lower-income households and renters.”
“I say this in part to convey a concern that while perhaps the upsides to innovation in intermediation are far larger than I at times perceive them to be, the downsides emanating from instruments and maturity transformation that are more plainly about managing regulatory processes seems a permanent feature of the environment.”
“Digital ledger technology is advancing, allowing financial assets—both money and securities—to be converted into digital tokens such as stablecoins, which are now being used in markets and not just tested in experiments.”
“My current estimate is that the increase in tariffs to date has contributed around one half of a percentage point to the current inflation rate of about 2-3/4 percent.”
“A low r-star implies the economy can encounter more frequent and longer periods when monetary policy is constrained by the effective lower bound on nominal interest rates, potentially impeding the achievement of a central bank’s inflation goals and other macroeconomic objectives.”
“Fund managers have also noted that higher relative returns offered by U.S. assets are discouraging diversification away from the U.S. dollar in global currency and asset allocation.”
“Longer-run inflation expectations have remained stable. And with the pullback in tariffs since early April, short- and medium-term inflation expectations have receded back close to their pre-pandemic averages.”
“I interpret the remaining factors (seasonally low bill supply, increased dealer repo intermediation capacity, reduced repo financing demand, and a temporary increase in government-sponsored enterprise [GSE] repo investment activity) as ones that induced a downward shift in the reserve demand curve.”
“And with the pullback in tariffs since early April, short- and medium-term inflation expectations have receded back close to their pre-pandemic averages.”
“This is the critical shift: We are no longer simply using technology to manage risk—we are using technology that is actively shaping how we perceive and interpret risk.”
“Inflation is unquestionably too high at about 4 percent, 1 well above the FOMC’s longer-run goal of 2 percent. This elevation primarily reflects three drivers.”
“On the price stability side of the Fed’s dual mandate, overall inflation—as measured by the Personal Consumption Expenditures price index—rose to 3-1/2 percent in March.”
“The first is the effect of higher tariffs on imported goods. The second is supply chain disruptions and higher energy and commodity prices owing to the conflict in the Middle East.”
“In the Fed’s monetary policy implementation framework, an ample supply of U.S. dollar reserves delivers adequate liquidity to the banking system, helping to maintain rate control and smooth market functioning.”
“Third, it implies being clear-eyed and disciplined in adapting to and communicating the changing economic landscape and resulting policy trade-offs and decisions.”
“I’ve found that regular engagement allows central banks to fine-tune their individual approaches, so that we can learn from one another’s experiences to better meet the needs of our constituencies.”
“The BIS Triennial Survey showed a 42 percent increase in spot FX activity since 2022. And there was an even larger volume increase for forwards and options,”
“In each of these episodes, productivity growth averaged around 3 percent. At other times, relatively slow productivity growth of around 1-1/2 percent prevailed.”
“3 International facilities including the central bank swap lines and the Foreign and International Monetary Authorities (FIMA) Repo Facility help ensure well-functioning U.S. dollar funding markets domestically and abroad.”
“I am confident that these investments will support strong productivity growth in coming years. But, right now, we’re in a race between available supply and surging demand.”
“Sergio, Stephan, and Emil’s work 3 on bank runs, to take what I think will become a representative example, was in a way almost infeasible prior to the ability to smartly read an immense amount of documentation.”
“Central banks today are confronting an increasingly complex environment shaped by repeated supply shocks, geopolitical uncertainty, and rapid advances in artificial intelligence and payments technologies.”
“I anticipate the pass-through of current tariffs to prices to be mostly completed in the next few months and therefore their effects on the inflation rate to fade.”
“To stay on top of these developments, central bankers must remain in a constant state of learning and listening, hearing from voices across disciplines, functions, and institutions.”
“As a result, we are seeing sharp increases in the prices of semiconductors, power transformers, and other technology that is essential for the AI buildout.”
“inflation is currently hovering around 3 percent, with tariffs contributing between one half and three quarters of a percentage point to this figure.”
“Meanwhile, in the NCCBR market segment, use of repo haircuts is fairly infrequent, with two pilot data collections in the NCCBR segment by the Office of Financial Research showing the majority of transactions involving Treasury securities had zero haircuts.”
“First, the tariffs have overwhelmingly been borne domestically—a New York Fed analysis estimates that most of the burden has fallen on U.S. firms and consumers.”
“By way of example, we are currently in the midst of a debt ceiling episode, which—if past experience is a guide—could see the TGA fall further before rapidly increasing by half a trillion dollars or more over the course of a few months.”
“The market withstood those pressures, as evidenced by fairly stable bid-ask spreads, market depth, and price impact measures. Trading volumes on primary platforms also increased notably, as is typical during highly volatile periods.”
“Many of you will have noticed that the FOMC implementation note was changed at the June meeting to make explicit that temporary pauses in RMPs could occur if money market conditions warrant.”
“My expectation is that any new tariffs will primarily replace those that were curtailed or will soon expire, so we shouldn’t see a significant additional impulse on prices from this source going forward.”
“My current estimate is that, to date, the increase in tariffs has contributed around one half to three quarters of a percentage point to the current inflation rate of about 3 percent.”
“By comparison, net tariff receipts as a share of imports rose from about 2-1/4 percent in the first three months of the year to around 10 percent in July.”
digital assetsinstitutional adoptionmarket evolution
Transcript excerptNY Fed speeches
“Later, when the risk materializes, we conduct a review and find that no single person made a bad decision. Instead, the system as a whole failed to “see” the risk clearly.”
“The Treasury began to rebuild its TGA balance in early July. This involved a rapid increase in net bill issuance and a commensurate drain of system liquidity.”
digital assetsinstitutional adoptionmarket structure
Transcript excerptNY Fed speeches
“Manufacturers indicated that over the past six months, the cost of their tariffed goods had risen by about 20 percent, on average. For service firms, the increase was about 15 percent.”
“Between early July and mid-September—when the TGA reached around $800 billion—the ON RRP fell from a balance of about $200 billion to de minimis levels, and reserves fell by $350 billion.”
“In the Treasury repo market, a lack of consistency and transparency in risk management practices could pose risks to market functioning if one or more counterparties were to default.”
“There are no signs of significant second-round effects from tariffs spilling over to the rest of the economy, and the labor market is not adding to inflation pressures.”
“The survey’s key finding is that about three-quarters of respondents in both sectors passed along at least some of these higher costs to their customers by raising prices.”
“By reducing the target range for the federal funds rate by a cumulative 75 basis points last year, the FOMC has moved the modestly restrictive stance of monetary policy closer to neutral.”
“In addition, underlying inflation outside of imported goods and energy has so far remained stable, and there are still no signs of significant second-round effects from tariffs spilling over to the rest of the economy.”
“Banks consider a range of factors when deciding on the level of reserves that they wish to hold, including market conditions, financial incentives, and their ability to make payments and fund outflows in both normal times and during stress.”
“Assets are now slowly growing in dollar terms, via RMPs, to maintain ample reserves and accommodate growth in the demand for Federal Reserve liabilities.”
“All in all, I expect tariffs will boost overall prices by a total of between 1 and 1-1/2 percent, with these effects continuing through the first half of next year.”
“All in all, although we are only seeing relatively modest effects of tariffs in the hard aggregate data so far, I expect those effects to increase in coming months.”
“Until COVID-19, central banks in emerging economies, including many in Latin America, typically had followed the lead of the Fed when responding to shocks.”
“Through the New York Innovation Center in the Markets Group at the New York Fed, and in collaboration with the Bank for International Settlements (BIS), we conduct hands-on research projects around technological innovation.”
“Indeed, there even has been a label attached to it: “conventional monetary policy.” By implication, other monetary policy actions that have been used—such as forward guidance and balance sheet policies—are deemed “unconventional,” and therefore somewhat suspect.”
“Although AI-supported algorithmic-based execution could minimize market impact, it could potentially increase opaqueness and impact the ability to identify emerging risks.”
“12 Latin American central banks acted quickly and decisively to tame high inflation by raising interest rates, starting with Brazil in the spring of 2021, followed by Chile, Colombia, Mexico, and Peru later that summer.”
“Assuming immediate recognition, standard macroeconomic theories predict a paradoxical result: an increase in trend productivity growth drives up real interest rates and causes an economic downturn, with hours worked, investment, and output declining.”
“I expect real GDP growth to be close to 2-1/2 percent this year, reflecting tailwinds from fiscal policy, favorable financial conditions, and investment in AI.”
“As I said, it’s hard to estimate exactly what constitutes an ample level of reserves. We know that number is lower than the current $3.2 trillion, since market indicators still point to reserves remaining abundant.”
“Over the past two months the EFFR has increased by four basis points relative to IORB, and the cumulative distribution of federal funds trades has noticeably shifted to the right, reflecting higher rates being paid by a variety of banks”
“Looking ahead, my base case is for inflation to be about 3 percent this year, before dropping to our 2 percent target in 2027 as the effects of tariffs and energy prices move into the rearview mirror.”
“This “perverse” result, in the words of John Campbell (1994), 5 stems from the combination of a strong wealth effect and higher expected real interest rates, which contribute to a transition period during which households enjoy greater consumption and leisure.”
“But we also know it is substantially larger than the $1.5 trillion level to which reserves dipped in September 2019, when they evidently became less than ample.”
“And with various short-term factors affecting prices, I expect overall inflation to come in at around 2-3/4 percent this year, before reaching our longer-run 2 percent target in 2027.”
“Looking ahead, if progress on our dual mandate goals continues as in my baseline forecast, I anticipate it will become appropriate to move interest rates toward a more neutral stance over time.”
“In terms of an implementation timeline, the TMPG is recommending that firms begin applying the repo risk management recommendations on a rolling basis, prioritizing their most material counterparty exposures and completing the process by June 2026.”
“Culture is not “soft,” or secondary. Culture is an operational asset. It is a form of resiliency, a non-technical redundancy, a backup system for judgment when data is incomplete, or the model is misleading.”
“Culture is not “soft,” or secondary. Culture is an operational asset. It is a form of resiliency, a non-technical redundancy, a backup system for judgment”
“I expect real GDP to grow about 2-1/2 percent this year, supported by stimulus from fiscal policy, favorable financial conditions, and robust investments in artificial intelligence.”
“And with the effects of tariffs on inflation waning later in the year, I expect overall inflation to come in at around 2-1/2 percent in 2026, then fall to 2 percent in 2027.”
“Amid elevated uncertainty in U.S. trade policy last April, we observed unusual price action: the dollar depreciated while Treasury yields rose and equities declined.”
“This garnered attention from market participants as it diverged from the typical “flight to quality” flows observed during risk-off episodes, in which the dollar tends to appreciate and Treasury yields tend to fall.”
“Given the size of the Treasury repo market—with over $8 trillion in daily average transaction volume—and its interconnectedness with other segments of financial markets, sound risk management is critical.”
“Looking further ahead, if inflation follows the path I expect, further reductions in the federal funds rate will eventually be warranted to prevent monetary policy from inadvertently becoming more restrictive.”
“After being driven primarily by healthcare over the past few years, employment growth in and around New York City has broadened to include the technology sector.”
“In my view, widespread use of haircuts for Treasury repo could enhance financial system stability and support market functioning during periods of stress.”
“I anticipate inflation will come in between 3 and 3-1/2 percent in 2025, and then fall back to about 2-1/2 percent next year before reaching 2 percent in 2027.”
“These are not “emergency,” “crisis,” or “break-the-glass” policies, but those that are well within the long tradition of monetary theory and practice.”
“asset holdings from historically low levels—a factor that contributed to the dollar's depreciation, even as available data showed limited evidence of foreign investors actively selling U.S.”
“With gradual recognition consistent with empirical evidence, an acceleration in productivity results in faster growth of both consumption and investment.”
“Understanding this distinction is critical because it suggests that the dollar's weakness stemmed largely from the mechanics of how hedging flows transmit through the FX market, rather than from a sudden shift in asset allocation.”
“But based on what the data tell us today, I expect the combined effects of trade and immigration policies and associated uncertainty to continue to weigh on growth.”
“In other words, the price action appears to reflect changes in the hedging behavior of global investors more so than a sudden, fundamental reassessment of U.S.”
“That’s why the next frontier of risk management is not deeper specialization. It’s integration: strategic, ethical, and operational coherence—across functions, levels, and tools.”
“And I expect PCE inflation to come in between 3 and 3-1/4 percent this year, before declining to around 2-1/2 percent next year, and reaching 2 percent in 2027.”
“Accordingly, at its meeting in mid-June, the FOMC decided to maintain the target range for the federal funds rate at 3-1/2 to 3-3/4 percent in support of the Fed’s dual mandate.”
“Over the past two months, SRF usage has risen from essentially zero to having greater frequency and higher volume of take-up, especially on days of temporary repo market pressures,”
“In particular, inflation expectations are very well anchored, no broad-based supply chain bottlenecks have emerged, labor markets are not creating inflationary pressures, and wage growth has moderated.”
“The Desk publishes its updated purchase schedule each month, and earlier today announced that it would purchase an additional $40 billion in Treasury bills through mid-March.”
“Centrally clearing SRPs would be one way to reduce such costs. Strictly from a monetary policy implementation perspective, there are likely benefits from offering a centrally cleared version of SRPs.”
“With growth running modestly above my estimate of its potential rate of 2 percent, I expect the unemployment rate to edge down very gradually to 4 percent in 2028.”
“For the reasons I outlined a moment ago, I expect overall inflation to decline to around 3-1/4 percent by year-end, then continue on a glide path toward our 2 percent goal in 2027 and land on target in 2028.”
“Recent evidence suggests this hedging activity may have plateaued, but it reinforces the need for consistent engagement with market participants to better understand shifts in trading activity that can have broader implications for the value of a currency and the FX market in general.”
“In fact, the U.S. Treasury recently estimated that TGA balances could peak around $1.025 trillion by late April, amid tax season inflows, likely resulting in a notable drawdown in reserves.”
“Treasury recently estimated that TGA balances could peak around $1.025 trillion by late April, amid tax season inflows, likely resulting in a notable drawdown in reserves.”
“My assessment is that the downside risks to employment have increased as the labor market has cooled, while the upside risks to inflation have lessened somewhat.”
“An adjustment to our monthly purchase pace is likely to happen soon. Beyond April, the TGA is likely to decline as the Treasury uses the funds it receives via tax inflows to pay its obligations.”
“The process has worked according to plan. The Fed’s securities holdings have shrunk from a peak of about $8-1/2 trillion in 2022 to $6-1/4 trillion today.”
“Therefore, I still see room for a further adjustment in the near term to the target range for the federal funds rate to move the stance of policy closer to the range of neutral,”
“This principle has become a bedrock of modern central banking, as economic analysis and history have shown that anchoring inflation expectations is important in maintaining low and stable inflation.”
“This finding that r-star has not meaningfully rebounded is in line with evidence from a variety of models of r-star in the U.S., which show a relatively modest increase of one-quarter to one-half of a percentage point in real-time estimates of r-star between the third quarter of 2018 and the first quarter of 2025.”
“Well-anchored inflation expectations short-circuit so-called second-round effects in wage and price setting that exacerbate and prolong the impacts of the kinds of shocks we saw during the 1970s.”
“A deep and liquid intraday market might enhance collateral management and reduce some frictions in managing intraday liquidity, which could reduce banks’ demand for reserves for payment purposes.”
“It will then be time to begin the process of gradual purchases of assets that will maintain an ample level of reserves as the Fed’s other liabilities grow and underlying demand for reserves increases over time.”
“As a result, in the initial stages following a shift, the economy is likely to behave more like a temporary increase in productivity growth than a permanent one.”
“Such reserve management purchases will represent the natural next stage of the implementation of the FOMC’s ample reserves strategy and in no way represent a change in the underlying stance of monetary policy.”
“In fact, as I mentioned nearly two weeks ago, in the not-too-distant future the Desk will start implementing daily morning SRF operations that will also be settled in the morning.”
“I am closely monitoring a variety of market indicators related to the fed funds market, repo market, and payments to help assess the state of reserve demand conditions.”
“Such reserve management purchases will represent the natural next stage of the implementation of the FOMC’s ample reserves strategy and in no way represent a change in the underlying stance of monetary policy.”
“Based on recent sustained repo market pressures and other growing signs of reserves moving from abundant to ample, I expect that it will not be long before we reach ample reserves.”
“This effect is greatest when the lending rate is closer to the target spread. On the other hand, if the lending rate is very high relative to the target spread, then the facility is rarely used, and the optimal supply of reserves is near what it would be absent a facility.”
“Respondents widely noted that movement toward instant 24/7 payments could increase their demand for reserves, and some also indicated that greater adoption of payment stablecoins could have similar implications.”
“Based on recent sustained repo market pressures and other growing signs of reserves moving from abundant to ample, I expect that it will not be long before we reach ample reserves.”
“These frictions add to the costs that counterparties face when using the facility and mean that counterparties generally require private market repo rates to trade materially above the SRF minimum bid rate before using the facility.”
“In recent years, aggregate non-reserve liabilities (excluding ON RRP) have increased by as much as about $250 billion on certain days and by as much as roughly $460 billion over a rolling 1-month time horizon ( Panel 10 ).”
“We saw evidence of frictions in SRF usage over a few days in December 2024, when a substantial amount of tri-party repo transactions—for which the SRF should be a close substitute—took place in the market at rates above the SRF minimum bid rate.”
“Over the past several years, the TGA has risen by somewhere between roughly $175 billion and $400 billion during April tax season and has gradually declined back to more normal levels thereafter ( Panel 11 ).”
“Although these estimates are useful for analysis and transparency, policymakers are well advised to avoid placing too great confidence in precise estimates of the stars in making real-world assessments and decisions.”
“Banks cite changes to liquidity regulations, as well as shifts in liquidity management amid the transition toward 24/7 payments and the adoption of payment innovations, as important drivers of their preferred levels over the next two years ( Panel 11 ).”
“Given the wide range of uncertainties, acting as if one knows the star variables when making policy can lead to persistent deviations of inflation from the target that risk unmooring inflation expectations.”
“In other words, there is no single best way to supply reserves; rather, the best mix of tools depends on circumstances and policy preferences unique to each jurisdiction.”
“In addition, should changes materialize, respondents may think that it will take time to see them implemented, and possibly even more time for banks to react.”
“This implies that banks would have to see large increases in overnight rates to be willing to shed modest amounts of reserves—or, conversely, that a modest decline in reserves could induce a substantial increase in overnight rates.”
“As shown on the left side of Panel 14 , banks reported significantly lower “hurdle spreads”—that is, how far above the SRP rate market repo rates need to be for them to “actively consider” using SRP operations.”
“Centrally clearing SRPs would be one way to reduce such cost and thus could further improve counterparty participation and the efficacy of SRPs in curbing rate pressures and maintaining the stability of funding markets.”
