Simon M Potter: Implementation of open market operations in a time of
transition
Remarks by Mr Simon M Potter, Executive Vice President of the Markets Group of the
Federal Reserve Bank of New York, before the Japan Center for Economic Research,
Tokyo, 25 September 2014.
* * *
I would like to thank Deborah Leonard and Matthew Raskin for their excellent assistance in the preparation of
these remarks and colleagues in the Federal Reserve System for numerous insightful comments and
suggestions.
Thank you, Takeuchi-san. It is a pleasure to reconnect with you here in Tokyo and an honor
to have the opportunity to speak before this distinguished audience.
Central banks responded aggressively to the financial crisis that began in 2007 and the slow
recovery that's followed, and have taken unprecedented steps in providing monetary policy
accommodation in pursuit of their macroeconomic policy objectives. In doing so, many have
had to adapt in unconventional ways the frameworks and tools they use to implement their
policy decisions. My remarks today will focus on the role played by the Open Market Trading
Desk (the Desk) at the Federal Reserve Bank of New York in the implementation of
monetary policy in the U.S., and on the evolution of our operational tools in recent years. I
will then discuss the implications of these changes for the Federal Reserve's balance sheet
and for the eventual "normalization" of monetary policy when the Federal Open Market
Committee (FOMC) believes it is appropriate to remove the extraordinary levels of monetary
policy accommodation that it has provided. Finally, I will discuss some of the considerations
that must be taken into account in normalizing monetary policy. As always, these are my
views and do not necessarily reflect those of the New York Fed or the Federal Reserve
System.
The desk's role in implementing monetary policy
The Federal Reserve (the Fed) has a somewhat more complex organizational and
governance structure than most other central banks around the world, so before discussing
recent developments in the implementation of monetary policy, I'd like to take a moment to
describe roles and responsibilities within the Federal Reserve System and where the Desk
fits in.
The statutory basis for U.S. monetary policy is found in the Federal Reserve Act, which was
enacted just over 100 years ago. Modern language around monetary policy objectives was
added in 1977, when the Board of Governors of the Federal Reserve System and the
Federal Open Market Committee were charged by Congress with maintaining "long run
growth of the monetary and credit aggregates...so as to promote effectively the goals of
maximum employment, stable prices, and moderate long-term interest rates." The goals of
maximum employment and price stability have come to be known as the Fed's "dual
mandate."
Formulating policy in pursuit of that dual mandate is the province of two separate-but-related
policymaking entities within the Federal Reserve System (the System) - the Board of
Governors of the Federal Reserve System (the Board of Governors) and the FOMC (which I
also refer to as "the Committee") - each of which has responsibility for certain policy tools.
The FOMC is the principal body for monetary policymaking and consists of the seven
members of the Board of Governors plus the presidents of the twelve Federal Reserve
Banks (only five of whom are voting members in any given year). The FOMC is responsible
for the use of open market operations (OMOs), which are purchases and sales of securities
in the open market for the System Open Market Account (SOMA), the Fed's securities
portfolio. OMOs are traditionally the primary tool through which monetary policy is
implemented. The Board of Governors is responsible for several complementary policy tools.
These tools pertain largely to depository institutions (DIs or "banks") and include the discount
rate - that is, the rate at which banks borrow from the discount window, the Fed's lending
facility administered through the twelve regional Federal Reserve Banks - and policies
around reserves held by depository institutions at the Fed (including reserve requirements,
and more recently, the payment of interest on reserve balances and term deposits).1
However, it's important to note that each of these tools is merely a means to an end, used to
influence financial conditions in order to achieve the Federal Reserve's dual mandate.
Since 1936, the New York Fed has been selected each year by the FOMC as the Bank
within the System responsible for the execution of OMOs. Within the New York Fed, the
Desk, under the guidance of a manager of the SOMA selected by the FOMC - currently me
- is responsible for conducting open market operations under the authorization and direction
of the FOMC.2 In practice, the FOMC's operating objective for OMOs - for example, a target
rate for overnight interest rates or a specified amount of assets to purchase - is
communicated to the Desk through a policy "directive" that the Committee votes on at the
conclusion of each meeting. This directive specifically instructs the Desk to conduct
transactions for the SOMA in furtherance of the desired operating objective.
The Fed's changed operating framework
In recent years, like many other central banks around the world in the face of the Great
Recession and the prolonged economic recovery that has followed, the Fed adopted
unconventional measures to provide monetary policy accommodation in pursuit of its
macroeconomic policy objectives. This is reflected in changes in the Fed's operating
framework and the FOMC's operating objective for OMOs.
For many decades prior to the crisis, the operating objective for OMOs was expressed as a
target for the federal funds rate - an overnight, unsecured rate in the market for reserve
balances. The target rate was achieved through permanent and temporary OMOs that
sought to adjust the supply of reserve balances in the banking system to a level that was
expected to equal the estimated level of demand for reserve balances at the FOMC's target
rate. The Desk's permanent additions to the supply of reserve balances were designed to fall
somewhat short of the total demand, creating a "structural deficiency" in the supply of
reserves. The Desk then conducted daily fine-tuning operations to temporarily add reserve
balances to get to the desired level. These daily operations represented a marginal
adjustment to the aggregate supply of reserves, largely in response to the exogenous impact
of transitory changes in other Fed liabilities such as currency in circulation and the level of
the U.S. Treasury's account balance at the Fed.
Minor variations in the total level of reserves supplied could move equilibrium market rates
up or down as individual depository institutions with a deficiency of reserves had to find and
trade with depository institutions with a surplus of reserves. This system functioned with a
relatively low level of reserve balances.3 The Desk was able to reliably achieve the FOMC's
policy directive under this implementation framework. The effective federal funds rate - the
average rate prevailing in the brokered federal funds market each day - routinely hit the
FOMC's target rate, generating a high degree of confidence among market participants in the
Desk's ability to implement policy.
This operating framework changed as the financial crisis deepened. By December 2008, the
FOMC had lowered its target for the federal funds rate from a point target of 51⁄4 percent in
mid-2007 to a target range of zero to 1⁄4 percent. With the federal funds rate and other
shortterm interest rates effectively at the zero lower bound, the FOMC's operating objective for
OMOs was expanded to include adjustments in the size and composition of the Federal
Reserve's securities portfolio. In particular, the FOMC initiated large-scale asset purchases
(LSAPs) of agency mortgage-backed securities (MBS), agency debt, and later longer-term
Treasury securities, in order to put downward pressure on longer-term interest rates, support
mortgage markets, and help make broader financial conditions more accommodative. The
expansion of the domestic securities portfolio that resulted from LSAPs vastly increased the
supply of reserve balances in the system (Figure 1).4
Importantly, in October 2008, the Fed was granted authority to pay interest on depository
institutions' reserve balances.5 In an environment of elevated reserve balances that resulted
from the Fed's asset purchases, the payment of interest on excess reserves (IOER) -
currently at a rate of 1⁄4 percent - has kept the overnight federal funds rate within its target
range (Figure 2).6 Although the FOMC continues to direct the Desk to undertake OMOs as
necessary to maintain conditions in reserve markets consistent with federal funds trading in a
range from zero to 1⁄4 percent, the Desk has not needed to conduct OMOs to manage the
supply of reserves since December 2008.
Instead, OMOs have focused on directives to adjust the size and composition of the SOMA
portfolio. Since late 2008, the FOMC has directed the Desk to carry out three large-scale
asset purchase programs and several other portfolio-oriented initiatives, such as the maturity
extension program (MEP) and changes in reinvestment policies (Figure 3). Under the MEP,
commonly referred to by market participants as "Operation Twist," the FOMC lengthened the
maturity profile of the SOMA's portfolio of Treasury securities by offsetting purchases of
longer-term Treasury securities with sales of equal par amounts of shorter-term securities
and redemptions of maturing ones.7 Additionally, since mid-2010, the FOMC has directed the
Desk to reinvest or roll over payments of principal on the securities holdings in the SOMA,
4
These asset purchases followed various programs the Fed initiated during the crisis to support the liquidity of
financial institutions and foster improved conditions in financial markets. Credit extension through these
crisisrelated programs was temporary in nature, so the impact of these programs on reserve balances was
unwound as the loans were repaid. In contrast, reserve expansion associated with LSAPs has a more
enduring effect as long as the assets remain in the SOMA portfolio, subject to offsetting influences on
reserves from changes in other balance sheet items.
5
The authority for the Federal Reserve to pay interest on reserve balances held by depository institutions was
granted by Congress prior to the crisis, in the Financial Services Regulatory Relief Act of 2006, with a planned
effective date of October 2011. However, implementation was accelerated as part of the response to the
financial crisis. The statute authorizes Federal Reserve Banks to pay interest on balances maintained to
satisfy reserve balance requirements (required reserves) and on excess balances (excess reserves).
6
As noted earlier, the Board of Governors is responsible for setting the rate of interest on reserves. Since
December 16, 2008, the interest rates on required reserve balances and excess reserve balances have both
been 1⁄4 percent, but the rates need not be the same. Although the interest rate on reserves represents an
overnight rate, it is calculated and paid out on a lagged basis according to two-week reserves management
maintenance periods. The payment is based on daily account balances and a weighted average of applicable
overnight rates over the maintenance period. More information can be found in Regulation D.
7
The MEP provided additional monetary policy accommodation by increasing the duration of the SOMA
portfolio, but unlike LSAP programs, on net it had a neutral effect on the level of reserves.
which maintains the size of the portfolio and adjusts the asset type and maturity composition
of its holdings.8
Large-scale asset purchases as a policy tool and their execution
Of course, as this audience knows well, the Federal Reserve was not the first major central
bank to use alternative tools for monetary policy implementation at the zero lower bound.
The quantitative easing policy (QEP) that the Bank of Japan (BoJ) initiated to combat
deflation in 2001, after operating for some time under a policy of zero interest rates, provided
a valuable precedent when central bankers elsewhere faced similar challenges later that
decade. However, the balance sheet expansion under the BoJ's original quantitative easing
differed significantly from the asset purchase programs undertaken by advanced economy
central banks over recent years, including the BoJ's current quantitative and qualitative
monetary easing (QQE). The earlier QEP was a liability-driven program in which the BoJ
changed its operating objective from an overnight interest rate to quantitative targets for the
level of current account balances outstanding at the BoJ (the counterpart to reserve balances
held by depository institutions at the Fed). To achieve its new target, the BoJ provided ample
liquidity through a range of operations. Although the BoJ increased its outright purchases of
long-term government bonds as part of this initiative, a large share of the easing was
accomplished through temporary open market operations or purchases of short-term
securities. In contrast, the FOMC's portfolio-oriented programs have been driven by a desire
to expand and lengthen the maturity structure of the asset side of the Fed's balance sheet in
order to put downward pressure on longer-term interest rates. The accompanying growth of
reserve balances has been a byproduct of those purchases, not a specified objective.
Former Fed Chairman Bernanke referred to this approach as "credit easing," in contrast to
the BoJ's "quantitative easing."9
The FOMC's different objective for OMOs reflects the primary transmission channel through
which LSAPs are understood to affect financial and economic conditions. Central bank
purchases of longer-term bonds reduce the stock of such securities held by private investors.
Accordingly, the purchases remove duration risk - and in the case of agency MBS,
prepayment risk - from the private sector, which drives term and other risk premiums on
those assets lower than they would otherwise be.10 This re-pricing of risk ultimately puts
downward pressure on long-term interest rates, an effect that spreads to other assets as
some investors rebalance their portfolios. The term premium effect of the Fed's purchases
should continue to influence financial conditions as long as the assets remain in the SOMA
portfolio, although the size of the effect will diminish over time as the risk associated with the
portfolio diminishes. Some standard portfolio risk measures illustrate the degree to which the
Federal Reserve has absorbed extra duration risk onto its balance sheet. The SOMA
Treasury portfolio currently has an average duration of about 7.5 years, compared with a
precrisis level of about 2.6 years. Meanwhile, the duration risk of the entire domestic securities
portfolio, including agency MBS and agency debt as well as Treasury securities, is equivalent
to about $2.9 trillion in 10-year Treasury securities (Figure 4). Purchases likely also work
through a signaling effect, to the extent that they are perceived as a credible signal of the
central bank's intentions regarding the future level of short-term interest rates. And in
circumstances when market functioning is unusually strained, as was the case prior to the
Fed's first LSAP program, asset purchases may enhance liquidity through the central bank's
consistent and significant presence in the market.
Over the past six years, the FOMC has been flexible in using these tools, adapting as it
learned and as individual circumstances changed. In the first two LSAP programs and MEP,
for example, the FOMC communicated an expected total size and completion date for each
program. However, the third (and current) LSAP program has been outcome-based, with the
FOMC announcing only a monthly pace and composition for its purchases and noting that
purchases would continue until there is a substantial improvement in the outlook for the labor
market in a context of price stability. Other central banks have also used conditional asset
purchases effectively. Perhaps the best example is the Outright Monetary Transactions
program announced by the European Central Bank (ECB) in September 2012. This program
is credited with helping to stabilize euro-area fixed income markets by ruling out certain bad
equilibria. This success was achieved without the purchase of a single asset. Another
example of conditional asset purchases is the BoJ's statement of a commitment to continue
QEP until inflation registered stably at or above zero.
Changes in the Fed's balance sheet and implications for normalization
So where are we now? The current purchase program appears to be nearing its completion.
Last week, the FOMC directed the Desk to reduce purchases of Treasury securities to
$10 billion per month and purchases of agency MBS to $5 billion per month starting in
October. The Committee also indicated that it will end the current purchase program at its
next meeting if incoming information broadly supports its expectation of ongoing
improvement in labor market conditions and inflation moving back toward its longer-run
objective. It also directed the Desk to maintain its agency MBS and Treasury security
reinvestment policies - activities it separately announced it expects to continue after it begins
to increase its target range for the federal funds rate.
Should this course come to pass, the domestic securities portfolio will peak at a par value of
about $4.2 trillion - more than a five-fold increase since the start of the financial crisis in
August 2007. The composition of the portfolio will also remain more complex. Formerly
composed entirely of Treasury securities, the domestic portfolio is now only 60 percent
Treasury securities, with the remainder held in agency MBS (and a small amount of agency
debt securities). As I noted earlier, the weighted average maturity of the Treasury portfolio
has lengthened substantially, while the MEP essentially eliminated the portfolio's holdings of
any Treasury securities maturing prior to February 2016. Meanwhile, it's hard to predict the
exact pace at which the SOMA portfolio's agency MBS holdings will pay down over time
given the prepayment uncertainty associated with those securities.
At last week's meeting, the FOMC also reaffirmed its view that it likely will be appropriate to
maintain the current zero to 1⁄4 percent target range for the federal funds rate for a
considerable time after the asset purchase program ends, especially if projected inflation
continues to run below the Committee's 2 percent longer-run goal, and provided that
longerterm inflation expectations remain well anchored. Meanwhile, as a matter of prudent
planning, the Committee has been deliberating how it should proceed to remove policy
accommodation (often called "normalization"), when it believes the appropriate time to do so
comes. Although the specific timing of this is not yet known, it's certain that the level of
reserve balances in the banking system will be very high. Assuming no other liabilities are
issued, there would be about $2.9 trillion in reserves - mostly in excess reserves - if the
Committee ends asset purchases next month and continues reinvestments. In itself, an
elevated level of reserve balances need not impede the FOMC's ability to effectively raise
the level of short-term interest rates because of the ability to pay interest on excess reserves.
Following last week's FOMC meeting, the Committee released a revised set of normalization
principles and plans (taking into account changes in the SOMA portfolio and enhancements
in available tools since it originally issued such principles in June 2011) that it intends to
implement when it becomes appropriate to begin normalizing the stance of monetary policy.
Importantly, as the Chair noted during her post-meeting press conference, this statement is
intended to provide information to the public about the eventual normalization process; it
does not signal a change in the current or future stance of monetary policy.
According to the principles, the Committee will adjust the level of monetary accommodation
primarily by utilizing policy tools to influence the level of short-term interest rates - in the first
instance, using tools with rates directly administered by the Fed. Tools that can immobilize or
drain large levels of reserves to tighten control over the federal funds rate also remain
available. However, the principles do not envision that active adjustments to the SOMA
portfolio will play a featured role.
Specifically, the FOMC indicated that the federal funds rate will continue to play a central role
in the Fed's operating framework and communications during normalization, and that it will
raise the target range for the federal funds rate when economic conditions warrant a less
accommodative monetary policy stance. Adjustments in the interest rate that the Fed pays to
depository institutions on excess reserve balances - that is, the IOER rate - will be the
primary tool to move the federal funds rate into the target range. Raising the IOER rate
should put upward pressure on a range of market interest rates and influence overall
financial conditions in a way that fosters the Federal Reserve's macroeconomic objectives.
The Committee also indicated that an overnight reverse repurchase agreement (ON RRP)
facility and other supplementary tools will be used, as needed, to help control the level of the
federal funds rate. An ON RRP facility will supplement the primary role of IOER in controlling
the federal funds rate by providing an alternative safe, overnight asset for money market
investors. I will describe the role of the ON RRP facility in more detail in a moment.11
The Committee expects to gradually return the balance sheet to a more normal size and
composition, primarily by ceasing to reinvest repayments of principal. A halt or reduction in
reinvestments is expected to occur after the FOMC begins increasing the target range for the
federal funds rate. The FOMC does not plan to use asset sales as part of the normalization
process, but suggests that limited sales might be warranted in the longer run to reduce or
eliminate residual agency MBS holdings.
The Federal Reserve will continue to test some of these tools to gather additional information
about their efficacy and to enhance their operational readiness prior to liftoff. For the past
year, the Desk has been conducting an exercise of ON RRP operations. Conducting ON
RRPs for same-day settlement with a broad range of counterparties - including primary
dealers, money funds, government-sponsored enterprises, and banks - allows the Federal
Reserve to provide a safe, liquid investment to a wider range of money market participants
than those able to earn IOER, and thus expands the universe of counterparties that should
generally be unwilling to lend at rates below those available through the Federal Reserve.
The increased competition that the availability of this instrument provides should help to firm
the floor on the level of short-term interest rates - that is, the rate beneath which market
participants should theoretically be unwilling to lend funds. Indeed, ON RRP exercise results
over the first year suggest that the operations have been successful working with IOER in
establishing a floor on the level of key money market rates (Figure 5).
All of the Desk's eligible counterparty types participate in the ON RRPs, with money funds
accounting for the largest share of take-up (Figure 6). Take-up at the operations generally
increases when the spread between market rates and the ON RRP offered rate narrows.
Take-up also rises substantially around quarter- and year-end financial reporting dates, when
some money market participants' access to other overnight secured investments is more
limited. The increase in take-up on these dates is especially large for prime money market
funds (Figure 7). In addition to patterns of usage of the ON RRPs themselves, we also
analyze trading patterns and interest rate dynamics in secured and unsecured funding
markets. In doing so, we use a wide range of data, including transactions data for unsecured
funding markets obtained through a new Federal Reserve collection effort (FR 2420).
While ON RRPs are a powerful tool for policy implementation, FOMC and market participants
have noted the potential for very large regular usage to alter patterns of financial
intermediation or, in a fixed-rate structure with no take-up limits, to exacerbate liquidity
pressures during times of stress. To further examine how ON RRPs might best be structured
to supplement IOER in the control of the federal funds rate while limiting the potential for
unintended effects in financial markets, the FOMC has directed the Desk to test several
changes to the design of its ON RRP operations. As of Monday, the per-counterparty
maximum bid limit was raised from $10 billion to $30 billion, and an overall size limit of
$300 billion was imposed for each operation. If the total amount of bids received in an
operation is less than or equal to the $300 billion size limit, awards will be made at a fixed
offering rate. However, if the total amount of bids received exceeds the overall operation size
limit, the $300 billion in ON RRPs will be allocated through a single-price auction using
interest rates that counterparties now include with their bids. Awards are made at a "stopout
rate" - the rate at which the overall size limit is achieved - with all bids below this rate
awarded in full and all bids at this rate awarded on a pro rata basis. The stopout rate is
determined by evaluating all bids in ascending order by submitted rate up to the point at
which the total quantity of offers equals the overall size limit.12 The Federal Reserve will be
closely analyzing the results of the ON RRP exercise conducted under these new testing
parameters in order to further its understanding of how an ON RRP facility might best be
structured during the initial stages of the normalization process.
In addition, the Federal Reserve Board has been testing a facility through which it offers term
deposits to credentialed depository institutions. Term Deposit Facility (TDF) transactions
could be used to temporarily reduce the quantity of reserve balances. An eight-week series
of tests this summer explored how demand for term deposits responds to variations in the
maximum award limits and rates. Higher offered rates attracted greater use, both in terms of
the number of participants and the total dollar volume demanded. Demand for the TDF may
have been tempered somewhat by the instruments' lack of an early-withdrawal feature, and
thus the inability to consider them as high-quality liquid assets for regulatory purposes. The
next round of TDF testing, which will commence in October, will incorporate an early
withdrawal feature, as well as gradually increase the maximum award amount and rate.
A broader perspective on normalization
I've discussed how the FOMC's eventual approach to removing monetary policy
accommodation reflects developments in the Federal Reserve's balance sheet since the
onset of the financial crisis. As noted earlier, the relatively long maturity structure of the
SOMA portfolio means that the level of reserve balances in the U.S. banking system will
decline only slowly through passive means, absent any asset sales. Other central banks that
have undertaken unconventional measures also face (or will eventually face) similar
challenges when they deem it appropriate to begin their own policy normalizations.
The Bank of England (BoE) and the Bank of Japan are two relevant examples that come
immediately to mind. The BoE's Asset Purchase Facility, through which its Monetary Policy
Committee (MPC) purchased £375 billion of longer-term assets between 2009 and 2012,
was quite comparable in purpose and design to the Fed's LSAP programs. Moreover, since
March 2013, the BoE has reinvested the cash flows associated with maturing gilts in the
facility in order to maintain the stock of securities at a steady level. In its February 2014
Inflation Report, the MPC provided guidance on its expected normalization framework, laying
out an approach in which its Bank Rate - the deposit rate for central bank reserves in the
U.K. - is the active marginal instrument for monetary policy while portfolio-related tools,
including reinvestments and asset sales, receive less emphasis. Specifically, the MPC
suggested that it intends to maintain its stock of purchased assets, including reinvesting the
cash flows associated with maturing securities, at least until it raises its target short-term
interest rate from its current level. Meanwhile, the BoJ is still purchasing assets under QQE,
which it launched in April 2013. With a goal of increasing its Japanese government bond
(JGB) holdings by ¥50 trillion per year, it has not yet initiated a discussion of eventual
normalization. When that time comes, however, the BoJ will be holding a large portfolio of
longer-term JGBs. The BoJ's balance sheet will therefore look markedly different than it did
when the QEP ended in 2006, at which time the BoJ just allowed short-term funds-supplying
operations to roll off. The portfolio size and composition to which each central bank
eventually normalizes will, of course, depend on what it eventually determines is appropriate
to support implementation of monetary policy in the longer run. Indeed, the FOMC has
indicated that in the longer run, it will hold no more securities than necessary to implement
monetary policy efficiently and effectively, and that it will hold primarily Treasury securities.
The ECB has also used unconventional measures to provide accommodation, but unlike the
Federal Reserve, BoJ, and BoE, this has primarily been through liquidity provided directly to
the banking system via longer-term refinancing operations, rather than through asset
purchases. This liquidity was provided at fixed terms of up to three years, thus allowing the
size of the ECB's balance sheet to normalize automatically as refinancing agreements
mature. By contrast, the ECB's upcoming purchases of asset-backed securities and covered
bonds will present it with longer-term portfolio considerations.
Finally, I should note that central banks - like other financial market participants - need to
remain aware of changes in the financial market landscapes in which they operate. They
may need to adapt their operations accordingly as they move away from asset purchases
and back to money market instruments to implement monetary policy. For example, in
addition to reflecting developments in its balance sheet since the financial crisis, the FOMC's
approach to normalizing policy also reflects changes in U.S. money market dynamics that
have been influenced by various factors. These factors include the extraordinary level of
liquidity that's been provided, access to IOER that is limited to depository institutions, and a
number of international and domestic regulatory reforms. International regulatory reforms
include the liquidity coverage ratio, leverage ratio, and net stable funding ratio. In the U.S.,
changes in deposit insurance premium calculations, rules governing money market mutual
funds, and the potential for a capital surcharge based in part on short-term wholesale funding
may also affect certain market participants. Many of the changes in regulation - along with
changes in market structure, technology, and other factors - may affect market participants'
activity and relationships in money markets. On net, their balance sheet costs may be higher,
which may prompt money market participants to require higher returns to engage in
competition to arbitrage wedges in money market rates and to alter their participation in
central bank operations and facilities. This outcome may affect the transmission of monetary
policy or require central banks to adapt their operations to accommodate these realities.
Conclusion
In conclusion, I'd like to note that the framework for implementing monetary policy and the
landscape in which we operate have seen important changes in the years since the crisis,
and they continue to evolve. The Desk plays an important role in this process, carrying out
open market operations at the direction of the FOMC, in pursuit of the operating objectives
the FOMC deems appropriate to achieve its dual mandate of maximum employment and
price stability. The operating tools that the Federal Reserve has developed wi