the beginning of normalization, their borrowing rates have increased since march with the rise in the broader constellation of money market rates. this could suggest that the increase in funding rates for these entities reflect bargaining dynamics, rather than increased demand or aggregate reserve scarcity. other tools such as term operations, as necessary for appropriate monetary control, based on policymakers'assessments of the efficacy and costs of their tools. ” 25 earlier this year, rates paid on the bulk of federal funds trading had ticked up, although they remained within the fomc ’ s target range. the uptick in the federal funds rates raised a question as to whether the effective federal funds rate might print above the fomc ’ s target range, absent a change in our operational settings. 26 to address the rise in the overnight rate within the range, a technical adjustment to the ior rate was made at the june fomc meeting : the ior rate was raised by 20 basis points while the fomc raised the target range by 25 basis points. following that change, all rates paid on federal funds borrowings, as well as in other money markets, rose by about 20 basis points. this made it less likely that the effr would be above the target range. at the september fomc meeting, the ior rate and target range were each increased by 25 basis points, maintaining the five - basis - point spread between the ior rate and the top of the target range, as shown earlier in figure 4. since the june technical adjustment, rates on federal funds transactions have continued to edge higher in the range, and most recently the effr has risen to the ior rate, or five basis points below the top of the target range. 27 it is possible that the effr could fluctuate around the ior rate or exceed the ior rate. however, i don ’ t believe that this upward pressure on the effr signals that we ’ ve reached balance sheet normalization or that we are at the “ steep ” portion of the reserve demand curve, where reserves are scarce. this is supported by the lack of evidence across a range of indicators signaling aggregate reserve scarcity. let me be clear : observing the effr and other rates above the ior rate is not a sufficient condition for reserve scarcity. 28 in the last few days, even amid upward pressure in overnight funding rates, we still have not seen the range of signs i described earlier that would indicate reserve

##ffr ) would remain within the target range set by the fomc. 5 i will discuss how this adjustment had exactly the intended effect on money market conditions, and how it has reinforced my certainty that the federal reserve is well positioned to maintain the public ’ s high confidence in its ability to appropriately control overnight interest rates. i would like to thank linsey molloy and kathryn chen for their assistance in the preparation of these remarks, darrian robinson and anne chen for their assistance with data, and colleagues in the federal reserve system for insightful comments and suggestions. these remarks are focused on the mechanics of policy implementation ; see williams, “ ‘ normal ’ monetary policy in words and deeds, ” september 28, 2018, for a discussion of the evolution of federal reserve policy actions and communications amid the exit from the extraordinary policy accommodation, and his perspective on what “ normal ” means. also see potter, “ confidence in the implementation of u. s. monetary policy normalization, ” august 4, 2018, for a thorough discussion about the implementation of monetary policy normalization. statement regarding reinvestment in treasury securities and agency mortgage - backed securities, september 20, 2017. the effective federal funds rate ( effr ) is calculated as a volume - weighted median of overnight federal funds transactions reported by banks on the fr 2420 report of selected money market rates. the new york fed publishes the effr for the prior business day, along with volumes and rate percentiles, on its website daily at approximately 9 : 00 a. m. eastern time. the effr is used as a measure of the typical federal funds transaction and is the way the new york fed ’ s open market trading desk ( the desk ) measures its success in meeting the directive on interest rate control from the fomc. as always, the views i will express today are mine alone and do not necessarily reflect those of the new york fed or the federal reserve system. let ’ s begin by reviewing where we are in the normalization process. the federal reserve began its efforts to remove policy accommodation with its overnight policy rate at the zero lower bound and with a large portfolio of long - duration securities. normalization, therefore, has two parts : increasing the overnight rate, and reducing securities holdings. short - term rate normalization first, let ’ s discuss overnight rates. the current monetary policy implementation framework relies on providing the market with two overnight investment opportunities to help steer short - term interest rates : interest on reserves