The Federal Reserve said on Thursday that it will not buy US Treasury notes for reserve management purposes for some time to come, which shows that policymakers believe that bank reserves in the financial system are at an agreed level. According to the New York Federal Reserve website, the New York Federal Reserve Open Market Operations Department does not plan to make reserve management purchases during the monthly operation period ending September 14, but it still plans to make reinvestment purchases of about 17 billion US dollars during the period. This suspension shows that although an increase in government cash balances may drain market liquidity, the monetary authorities are still confident that the financing market can run smoothly. Market performance also confirms this. The interest rate for guaranteed overnight financing was lower than the reserve balance interest rate for most of July. As of August 12, the SOFR fixed interest rate was 3.62%, 3 basis points lower than IORB. This adjustment does not mean a change in monetary policy or balance sheet strategy.

The Federal Reserve said on Thursday that it will not buy US Treasury notes for reserve management purposes for some time to come, which shows that policymakers believe that bank reserves in the financial system are at an agreed level. According to the New York Federal Reserve website, the New York Federal Reserve Open Market Operations Department does not plan to make reserve management purchases during the monthly operation period ending September 14, but it still plans to make reinvestment purchases of about 17 billion US dollars during the period. This suspension shows that although an increase in government cash balances may drain market liquidity, the monetary authorities are still confident that the financing market can run smoothly. Market performance also confirms this. The interest rate for guaranteed overnight financing was lower than the reserve balance interest rate for most of July. As of August 12, the SOFR fixed interest rate was 3.62%, 3 basis points lower than IORB. This adjustment does not mean a change in monetary policy or balance sheet strategy.