Federal Reserve's Williams: Bond Purchases Expected to Start Soon

BlockBeats News, November 8th, Federal Reserve's Williams said on Friday that the Fed's decision last week to stop reducing its bond holdings may soon need to be followed by bond purchases to expand its balance sheet. Williams said, "The next step in the balance sheet strategy will be to assess when the level of reserves moves from its current slightly above ample to ample." He added that once this happens, "it will be time to start a gradual process of asset purchases."

Williams also stated, "Based on recent persistent pressures in the repo market and other signs that reserves are shifting from ample to slightly above ample, I anticipate that we will soon reach an ample level of reserves." Some analysts expect the Fed to start expanding its asset size through bond purchases in the first quarter of next year. Williams cautioned that the specific timing is hard to pinpoint. "I am closely monitoring various market indicators related to the federal funds market, repo market, and payment markets to help assess the status of reserve needs." He also warned that maintaining adequate liquidity through bond purchases is not a stimulus measure. (FX678)