Fed Halts Reserve Management Purchases, Signaling Shift in Balance Sheet Policy
From August 14 to September 14, the Federal Reserve Bank of New York will cease its Reserve Management Purchases (RMPs), cutting them down from $10 billion per month to none. Launched in mid-December, RMPs involved acquiring $40 billion in Treasury bills monthly to enhance reserves. Following April 15, the Fed reduced these purchases to $10 billion and is now eliminating them, in accordance with recommendations made by Kevin Warsh during his inaugural FOMC meeting on June 17. The Fed's balance sheet stands at $6.76 trillion. During this timeframe, mortgage-backed securities (MBS) will continue to automatically run off, with an anticipated $17 billion in MBS runoff, while purchasing a similar amount in T-bills. Since fall 2022, MBS holdings have declined by $809 billion (29%).
Key facts
- The Federal Reserve Bank of New York announced it will halt Reserve Management Purchases (RMPs) for August 14 through September 14.
- RMPs were previously tapered to $10 billion per month.
- RMPs were started in mid-December, involving $40 billion in Treasury bill purchases monthly.
- The halt follows changes suggested at Kevin Warsh's first FOMC meeting on June 17.
- The FOMC Implementation Notes changed from 'Increase...' to 'When appropriate, increase...' regarding securities purchases.
- The Fed's balance sheet stands at $6.76 trillion.
- MBS runoff will continue and be replaced with T-bills, with an estimated $17 billion runoff for the period.
- Since fall 2022, the Fed has reduced MBS holdings by $809 billion (29%).
- The ratio of Fed assets to GDP dropped to 20.7% at the end of Q2.
Entities
Institutions
- Federal Reserve Bank of New York
- Federal Reserve
- FOMC