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Operational Perspectives on Monetary Policy Implementation:
Panel Remarks on “The Future of the Central Bank Balance Sheet”

Lorie K. Logan

Deputy Manager, System Open Market Account
Senior Vice President, Markets Group

Currencies, Capital, and Central Bank Balance Sheets: A Policy Conference
Hoover Institution, Stanford University
May 4, 2018

Figure 1:
Historical and Projected SOMA Domestic Securities Holdings

USD, billions

Smaller liabilities scenario

Median liabilities scenario

Larger liabilities scenario

Historical holdings

4,500
4,000

3,500
3,000
2,500

2,000
1,500
1,000

500
0

Source: Federal Reserve Bank of New York staff projections (Report on Open Market Operations during 2017).
Note: Figures are as of year-end. Figures for 2018 onwards (dashed lines) are projected holdings and are rounded.
Scenarios are based on the 25th, 50th, and 75th percentile responses to a question about expectations for the size and
composition of the Federal Reserve’s balance sheet, on average in 2025, conditional on not moving to the zero lower bound,
in the Federal Reserve Bank of New York’s December 2017 Survey of Primary Dealers and Survey of Market Participants.

Figure 2:
Federal Reserve Liabilities and Capital
Billions of U.S. Dollars
Pre-Crisis
Average
(H1 2007*)

Current
Level
(4/25/18)

16

Expected Average Value in 2025**
Smaller
Liabilities
Scenario

Median
Scenario

Larger
Liabilities
Scenario

2,011

412

600

750

772

1,596

1,900

2,200

2,400

Treasury General Account

6

403

200

300

365

Other deposits

0

80

50

75

100

Reverse repos
(foreign official accounts)

34

235

120

200

250

Reverse repos
(private counterparties)

n/a

4

58

100

150

All other liabilities and
capital

40

45

50

50

57

Total

869

4,373

2,790

3,525

4,072

Reserve balances
Non-reserve liabilities:

Federal Reserve notes

Sources: Federal Reserve Board; Federal Reserve Bank of New York.
* Average of Wednesday levels.
** Expected average values in 2025 are based on the 25th, 50th, and 75th percentile responses to a question about expectations for
the size and composition of the Federal Reserve’s balance sheet, conditional on not moving to the zero lower bound, in the
Federal Reserve Bank of New York’s December 2017 Survey of Primary Dealers and Survey of Market Participants.

Figure 3:
Stylized Monetary Policy Implementation Frameworks

Interest rate
Scarce
Reserves
(corridor)

Abundant
Reserves
(floor)

Marginal lending rate
(primary credit rate)
Demand for reserves

Marginal deposit rate
(IOER rate)
ON RRP rate

0

Required
Reserves

Reserve
balances

Figure 4:
Intraday and Interday Volatility in Fed Funds Rates during the Crisis
Daily Overnight Federal Funds
Trading Range
Percent

10

Federal funds trading range
Federal funds target rate
Primary credit facility rate
(15%)

Daily Effective Fed Funds Rate
Less Target Rate
Basis points

100

(11%)

9
8

50

7
6

0

5
4

-50

3
2

-100

1
0

-150

Source: Federal Reserve Bank of New York.
Note: Time series end on December 15, 2008, when the FOMC introduced a target range for the federal funds rate.

Figure 5:
Variability of Non-Reserve Liabilities and Capital
USD, billions

200

Distributions of Changes in Weekly Averages of
Non-Reserve Liabilities and Capital*

150
100
50
0
-50
-100
-150

Sources: Federal Reserve Board; Federal Reserve Bank of New York staff calculations.
* Boxes indicate interquartile ranges, and whiskers indicate minimum and maximum outcomes. Data show the distribution of changes in
weekly averages of daily figures for liabilities outside the direct control of the Fed (currency, Treasury accounts, foreign repo pool, and
other deposits) and capital. Liabilities associated with monetary policy instruments (overnight and term reverse repos conducted with
private counterparties and term deposits held by depository institutions) are not included.

Figure 6:
Effective Federal Funds Rate
Percent

2.00

Federal Funds Target Range
Effective Federal Funds Rate

1.75
1.50
1.25

1.00
0.75
0.50
0.25
0.00

Source: Federal Reserve Bank of New York.