Lorie Logan, Interview: Macro Musings Podcast

Page(s): 11

“At the December FOMC meeting, participants suggested that it will be important that we monitor money market conditions as reserves fall in order to assess the appropriate level of reserves to maintain ample conditions. Indeed, we do have a lot of money market data, which allows us to observe those conditions in money markets at a granular level. And we do have our experience from the prior normalization to help serve as a guide when assessing those reserve conditions. And we have the new standing repo facility in place as a backstop now, which wasn’t the case during the prior normalization period. So I expect that the long run portfolio size will again be driven by demand for Federal Reserve liabilities consistent with maintaining an ample reserves regime. The exact level is something that’s unknown and will be something that we’ll be monitoring to determine as the balance sheet declines.”