John Williams, Speech: The Song Remains the Same

“The ON RRP facility has broadened the set of our counterparties and diversified the type of instruments on the liability side of our balance sheet. This facility has supported the control of short-term interest rates according to the FOMC’s policy direction.”

“This has had profound effects on the composition of liabilities on our balance sheet. Traditionally, the Fed’s liabilities have primarily been paper currency and reserves held by banks at the Fed. For example, a decade ago, paper currency totaled $1.1 trillion and bank reserves $1.5 trillion. But since then, we’ve seen a dramatic change in the makeup of the liability side of our balance sheet. Today, in addition to $2.3 trillion of currency and $3.3 trillion of bank reserves, there are $2 trillion in overnight reverse repos, representing funding from nonbank sources such as money market funds.”