Monetary Policy Implementation: Adapting to a New Environment
October 14, 2021
Lorie K. Logan, Executive Vice President
Remarks before the Money Marketeers of New York University
The SRF is intended to address pressures in the repo market that can spill into the federal funds market, and to flexibly add reserves, when needed. Both primary dealers and banks can access repo funding through the SRF against a limited set of high-quality securities: U.S. Treasuries, agency debt, and agency MBS. While primary dealers have long been counterparties to the Federal Reserve’s open market operations, the FOMC decided in July to add banks as eligible counterparties to the SRF, which allows them to access the facility on similar terms as primary dealers. Additionally, banks are key participants in the federal funds market and adding them should enhance interest rate control by offering a backstop source of liquidity. Earlier this month, the New York Fed began accepting formal expressions of interest from banks to become SRF counterparties. Several have started the process, and we expect the first group of banks will be able to participate in the SRF early next year. I encourage banks interested in learning more about the SRF to reach out to the New York Fed.
The full speech is available at https://www.newyorkfed.org/newsevents/speeches/2021/log211014