Federal Reserve press conference, 2019-05-01 — Chair Jerome Powell

Question (Jean Yung, MNI): Hi, Jean Yung with Market News. If the fed funds rate keeps rising, do you see room for another IOER adjustment? And then, can you speak to any other strategies or tools that might be useful for keeping a ceiling on short-term interest rates? There have been other ideas floated, like the standing repo facility and targeting a different benchmark rate.
Answer: If we need to, and as needed, we will use our tools to keep the federal funds rate somewhere in the target range. We’ll do that. Don’t expect to need to do it again, but we don’t know. I mean, we’re—with—the balance sheet is now—the size of it is going to be driven by demand for liabilities, principally reserves, as I mentioned. And we’re right at that point where we’re starting to learn more and more about what the real demand for reserves is over the next few months. And so I—there is no template for this. There’s no roadmap. We just have to do it, and that’s why we’re moving so very gradually. It’s why we tapered the roll-off to only $15 billion in Treasuries per month. Effective, I guess, today, we’re cutting the roll-off rate for Treasuries in half just because we want to take our time and move gradually here. So that’s that. In terms of other tools, we’re actually—I’m sure at an upcoming meeting we will be looking at the idea of a repo facility. I don’t have any presupposition that it’s something we would do, but we’ll be taking a look at it as a possible addition to our toolbox. Again, I wouldn’t say—it would just be a way for us to do what we do, which is to do a deep dive on it, think carefully about it, look at the pros and cons, look at the different possible ways to do it, and then go away and think about it for a little while. And then probably come back and make a decision. But that’s something we’ll do at an upcoming meeting, I would imagine.