paid on excess reserves ( ioer ) held by depository institutions as its primary tool for keeping the federal funds rate in its target range. it supplements this tool by offering overnight reverse repos ( on rrps ) at a specified offering rate to a broad set of counterparties, including eligible money market funds, government - sponsored enterprises, primary dealers, and banks. 5 together, ioer and on rrps set a floor on rates, beneath which bank and nonbank financial institutions with access to these facilities should be unwilling to lend funds. 6 this framework has been working very well. since december 16, 2015, when the fomc began the process of normalizing the stance of monetary policy, it has raised its federal funds target range four times to a current range of 1 to 1¼ percent. the effective federal funds rate ( effr ) has been within the fomc ’ s prevailing target range on all but one day, and changes in the federal funds rate continue to transmit in a predictable and effective way to other money market rates. 7 balance sheet normalization commences … with normalization of the level of the federal funds rate well underway and interest rate control effectively established, the fomc has now begun the process of normalizing the fed ’ s balance sheet, using a program described this past june in an addendum to its policy normalization principles and plans. 8 specifically, as of last month, the fomc is gradually reducing the fed ’ s securities holdings by decreasing its reinvestment of principal payments received from those securities, with payments being reinvested only to the extent that they exceed gradually rising caps. 9 this process for reducing the balance sheet will run in the background, while changes in the target range for the federal funds rate are the fomc ’ s primary means of adjusting the stance of monetary policy. however, the fomc said it would be prepared to resume reinvestments if a “ material deterioration in the economic outlook were to warrant a sizable reduction in the committee ’ s target for the federal funds rate, ” and it would be prepared to use its “ full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal fund rate. ” these conditions help identify the types of circumstances that might lead to some adjustments in the balance sheet normalization process, although chair yellen has noted

william c dudley : transcript of fireside chat at york college in queens transcript of a discussion between mr william c dudley, president and chief executive officer of the federal reserve bank of new york, and dr olajide oladipo, professor and chair of the business and economics department, during the fireside chat at york college in queens, new york city, 24 march 2017. * * * dr. olajide oladipo : president dudley, can you please share with us the purpose of your trip here today to queens? president dudley : so, there are 12 federal reserve banks around the united states, and one of them is the federal reserve bank in new york that sits downtown in manhattan, and near wall street. our second district consists of new york, northern new jersey, fairfield county, connecticut, puerto rico, and the virgin islands. haven ’ t gotten to the virgin islands yet. as part of our mission, we want to represent the communities in our district, and so four times a year, i get on the road, and i go out to visit people, to find out what ’ s really happening on the ground. it ’ s meeting with businesses, meeting with people from educational institutions, going to visit manufacturing facilities, community development organizations. it ’ s really designed to do two things. one, explain sort of a little bit of what we do – like for example there, in the introduction, talking about this bis. what the heck is the bis? well, bis is a bank for central banks that sits in basel, switzerland. in fact, what did i do last weekend? well, i was in basel, switzerland, at the bis. this is where central bankers get together from across the world, exchange information with one another. so, the first thing is to explain ourselves to people in the community. because the federal reserve is pretty mysterious in terms of – when i went to grad school even, i wasn ’ t really sure again what the federal reserve was. had to be explained to me. the second thing we do in the community, and this is the more important piece, is to really learn what ’ s going on, on the ground, in the community. what ’ s happening in terms of businesses – are they successful? if they ’ re having trouble, what are the reasons for the trouble? do they have access to the credit? can they find people with the job skills they need to support their businesses? what are the challenges