MNI BRIEF: Fed's Williams - Not Long Before Reserves Are Ample

It won't be long before the reserves in the U.S. banking system reach an "ample" level, at which point the Federal Reserve will begin gradual purchases of assets to keep up with growth in its liabilities, New York Fed President John Williams said Friday. 

"Based on recent sustained repo market pressures and other growing signs of reserves moving from abundant to ample, I expect that it will not be long before we reach ample reserves," he said in remarks prepared for an ECB conference in Frankfurt. 

The next step in the Fed's balance sheet strategy is to assess when the level of reserves has reached ample, he said. "It will then be time to begin the process of gradual purchases of assets that will maintain an ample level of reserves as the Fed’s other liabilities grow and underlying demand for reserves increases over time." 

The Fed is closely monitoring a variety of market indicators related to the fed funds market, repo market, and payments to help assess the state of reserve demand conditions, he said, adding reserve management purchases do not represent a change in the stance of monetary policy. (See: MNI INTERVIEW: Fed Soon To End QT On Funding Strains - Wright)