Fed money markets director dismisses speculation of balance sheet changes, affirming $10 billion monthly Treasury bill purchases pace.
A New York Fed official stated the Federal Open Market Committee’s updated reserves language is a technical clarification, not a signal of policy change. The remarks aim to reassure markets that Treasury bill purchases will continue at the current $10 billion monthly pace, adjusting to liquidity conditions as needed.
The Fed’s balance sheet has expanded from $6.5 trillion to $6.7 trillion since December due to bill purchases. Analysts had interpreted the language shift as a potential precursor to a faster wind-down, which could tighten short-term liquidity and lift repo rates.
Markets remain sensitive to any hint of accelerated balance sheet normalization, particularly given Fed Chair Jerome Powell’s past comments on reducing bond holdings. A sharper-than-expected reduction could trigger repricing in front-end rates and risk assets.