An increase in bank reserves is putting downward pressure on short-term rates but the Federal Reserve is keeping a close eye on money markets and is prepared to make adjustments as needed, a senior New York Fed official said on Thursday. As reserves rise, the Fed’s facility for overnight repurchase agreements will become a more central part of the central bank’s tool kit for controlling short-term rates, said Lorie Logan, an executive vice president at the New York Fed and the manager of the System Open Market Account. “With reserves expected to grow further, we will be monitoring money markets closely and will continue to make adjustments as needed,” Logan said in prepared remarks for a virtual event organized by the Securities Industry and Financial Markets Association (SIFMA).
