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Monetary Policy Implementation: Adapting to a New Environment Lorie K. Logan, Executive Vice President October 14, 2021 The views presented here are those of the author and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System Figure 1: Assets of the Federal Reserve $ Billions $ Billions 9,000 8,000 9,000 Other Assets* 8,000 Repurchase Agreements, Swaps, Credit, and Liquidity Facilities** 7,000 Agency MBS 7,000 6,000 Treasuries 6,000 5,000 5,000 4,000 4,000 3,000 3,000 2,000 2,000 1,000 1,000 0 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 0 Oct-21 Note: *Includes agency debt, gold certificates, special drawing rights, coin; foreign currency denominated assets, bank premises, unamortized premiums and discounts on securities held outright, accrued interest, net portfolio holdings of the Maiden Lane LLC, and other accounts receivables. ** Includes repurchase agreements, central bank liquidity swaps, primary and secondary credit, Primary Dealer Credit Facility, Money Market Mutual Fund Liquidity Facility, Paycheck Protection Program Liquidity Facility, and net portfolio holdings of the Commercial Paper Funding Facility, Corporate Credit Facilities, Main Street Lending Program, Municipal Liquidity Facility and Term Asset-backed Securities Loan Facility. Source: Board of Governors of the Federal Reserve System H.4.1 Statistical Release 2 Figure 2: Liabilities of the Federal Reserve $ Billions $ Billions 9,000 9,000 8,000 7,000 6,000 Other Liabilities and Capital 8,000 Reserves Overnight Reverse Repuchase Agreements 7,000 Treasury General Account (TGA) 6,000 5,000 5,000 4,000 4,000 3,000 3,000 2,000 2,000 1,000 1,000 0 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 0 Oct-21 Source: Board of Governors of the Federal Reserve System H.4.1 Statistical Release 3 Figure 3: Change in Government Money Fund AUM and Treasury Bill Supply $ Billions 600 400 200 0 -200 -400 -600 -800 -1000 Change in Government MMF AUM -1200 Change in Treasury Bill Supply -1400 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Note: Government money market funds include 2a-7 money market mutual funds that invest 99.5 percent or more of their total assets in cash, government securities, and/or repurchase agreements that are collateralized fully. Source: FRBNY, iMoneyNet 4 Figure 4: Overnight Reverse Repo Usage $ Billions 1,800 Money Funds Government-Sponsored Enterprises Primary Dealers Banks 1,600 1,400 1,200 1,000 800 600 400 200 0 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 Jan-21 Source: FRBNY 5 Figure 5: Effective Federal Funds Rate and FOMC’s Target Range Percent 0.30 1st to 99th percentile range of trades underlying the effective federal funds rate Technical adjustment Effective federal funds rate 0.25 0.20 0.15 0.10 0.05 0.00 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Note: The gray shaded area indicates the FOMC's target range for the federal funds rate. Source: FRBNY Jul-21 Aug-21 Sep-21 6