NY Fed's Perli says monetary policy toolkit working very well

He also said recent central bank actions to add liquidity to the financial system, which are currently paused, are not a preset course, suggesting the Fed could again buy Treasury bills if it thought it needed to bolster market liquidity. He also said so-called Reserve Management Purchases of Treasury bills will be adapted to market liquidity needs.

When it comes to Treasury bill buying, “the recent decisions to set them at zero are no different in spirit than any of the other decisions the Desk has made since RMPs started in December of last year,” Perli said.

The Fed had been buying bills in large quantities to bolster market liquidity levels and to ensure firm control over the federal funds target rate range, the institution’s main tool to achieve its policy goals. It stopped buying recently after concluding the market had the needed amount of liquidity. The buying had been technical in nature and was not designed to provide stimulus to the market, even as the purchases increased the overall size of the Fed’s balance sheet.