Federal Reserve press conference, 2019-10-30 — Chair Jerome Powell

Question (Donna Borak, CNN): Donna Borak with CNN. Chair Powell, setting aside market expectations for today’s rate cut—obviously, 97 percent sort of expected that this would happen today—can you tell us a little bit more about the rationale behind moving at this particular meeting as opposed to waiting six weeks and cutting in December, and if there was any discussion about that around the table? Thanks.
Answer: Yes. I think this seems to be the right movement. You can see that we had our usual range of perspectives, range of views. But, in the end, we had a strong vote in favor of this action. I strongly believe it’s the right action. I strongly believe that the actions we’ve taken over the course of this year have been the right things to do for this economy and are supporting economic growth and will do so in the future. So—

Question (Nancy Marshall-Genzer, Marketplace): Hi. Nancy Marshall-Genzer with Marketplace. Have the problems in the repo market led you to look into whether the liquidity and capital requirements for banks are too high? Is that something that the Fed might review?
Answer: So we’re—I think, again, I think the most important basic thing is to get the level of reserves back up so that—reserves move up and down with some volatility. We don’t want them to move below the level they were at in the beginning of September, which is, again, between $1.45 and $1.5 trillion. That’s the main thing, that’s the first thing. And we’re on a path to do that, between our temporary open market operations and also our bill purchases. In addition to that—in addition to that, we’re looking at—there are—it’s a big, complicated marketplace, and there was the—one of the surprises, as I mentioned, was that banks that had told us that their lowest comfortable level of reserves was here. They were well above that, and yet they didn’t deploy that liquidity when there seemed to be great opportunities to do that. That didn’t happen. So why is that? And so, we’re doing careful analysis of that. You ask, would we lower capital and liquidity requirements because of this? I don’t think so. I don’t think that’s where this goes. I think where it may go, though, is to look at, for example, intraday liquidity, which used to be a common thing. It used to be a common thing for banks to have intraday liquidity from the Fed, what are called “daylight overdrafts.” That’s something we can look at. Also, there are just a few technical things that we can look at that would perhaps make the liquidity that we have—which we think is ample in the financial system—move more freely and be more liquid, if you will. And those are things we would do, but only if we can do it without compromising safety or soundness or financial stability.

Question (Brian Cheung, Yahoo Finance): Hi. Brian Cheung with Yahoo Finance. Another type of balance sheet question, but not necessarily focused on the repo crunch—there was a discussion before that, that maybe we should move—or, rather, the Fed should move to a more neutral balance sheet, trying to remove some of the agency mortgage-backed securities that are on the balance sheet and maybe replace them with shorter-term Treasuries. Not any—I haven’t really heard an update on the composure or the composition of the balance sheet for right now. I’m just wondering if the Fed is actively thinking about that right now, and, if so, when we might expect to hear something on that.
Answer: You know, it’s a—it’s an issue, but it’s not an issue that we’re currently working on and—or reaching a decision on or anything like that. The question of the longer-run maturity composition of the balance sheet is a—is a big one, and it’s one we’ll return to over time, but not—not imminently.