Fed Pauses Treasury Purchases for Reserve Management for Second Straight Month

BlockBeats news, September 15 — The Federal Reserve said on Monday that it will refrain from purchasing U.S. Treasury bonds for reserve management purposes for a second consecutive month in the upcoming cycle, indicating that policymakers believe the level of bank reserves in the current financial system is at an appropriate level. The Open Market Operations desk at the New York Fed plans to conduct no reserve management purchases during the monthly cycle ending October 14. However, the desk still plans to carry out approximately $15.6 billion in reinvestment purchases during the same period. The Fed's decision to pause reserve management purchases signals its confidence in the functioning of funding markets. This is also reflected in the Secured Overnight Financing Rate (SOFR), which has been at or below the Interest on Reserve Balances (IORB) rate for most of the past month.

Meanwhile, the U.S. Treasury has also reduced its supply of Treasury bills ahead of the quarterly tax deadline. This change does not signal a shift in the Fed's monetary policy or balance sheet strategy. (Note: "Reserve management purchases" here are primarily used to adjust the level of reserves in the banking system and are not quantitative easing in the traditional sense. The Fed is still conducting operations related to MBS reinvestment, which is part of balance sheet management.) (Jinshi)