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Economy May 19, 2026 11:31 AM

NY Fed official says existing rate-control tools can function with fewer bank reserves

Roberto Perli signals flexibility on Treasury bill purchases as Fed monitors market conditions and reserve needs

By Derek Hwang

A New York Fed official overseeing open market operations said the Federal Reserve’s current framework for controlling interest rates remains effective even if banks hold fewer reserves. The official also noted that recent Treasury bill purchases to rebuild liquidity will be adjusted based on market conditions and that the Fed is prepared to change the pace of purchases in either direction.

NY Fed official says existing rate-control tools can function with fewer bank reserves

Key Points

  • The New York Fed’s current ample-reserves implementation framework is effective and can handle a reduction in the SOMA portfolio if the financial system allows lower reserve levels - impacts banking and monetary policy operations.
  • The Fed began buying Treasury bills late last year to rebuild liquidity; purchases have been reduced from $40 billion per month to $10 billion and will be adjusted based on market conditions - impacts Treasury and money markets.
  • The Fed has signaled operational flexibility, stating it is prepared to increase or decrease the pace of Reserve Management Purchases as necessary - impacts short-term funding markets and liquidity providers.

A senior New York Federal Reserve official responsible for carrying out monetary policy said on Tuesday that the central bank’s present toolkit for keeping interest rates under control would remain effective in an environment where banks hold lower quantities of reserves.

Roberto Perli, manager of the System Open Market Account (SOMA) at the New York Fed, delivered prepared remarks to an Atlanta Fed conference stating that the current implementation framework - which relies on ample reserves - is demonstrably effective, but that there is an active public discussion about how many reserves that framework requires.

Perli said the ample reserves implementation approach is capable of accommodating a decline in the SOMA portfolio should structural changes in the financial system permit lower reserve levels.

He also addressed the Fed’s purchase program for Treasury bills, which began late last year as a means to restore liquidity following several years of shrinking central bank holdings. Perli emphasized that the pace of those purchases will be responsive to prevailing market conditions and will not follow a fixed trajectory.

The pace of Reserve Management Purchases has already been curtailed from $40 billion per month to the current $10 billion per month. Perli said the central bank stands ready to modify the pace of purchases - increasing or decreasing them - as circumstances require.

Contextual notes from the remarks

  • Perli underlined that the implementation framework currently in place is effective in practice.
  • There is an ongoing public debate about the amount of reserve supply the current framework implies.
  • The Fed’s recent program to buy Treasury bills was started to rebuild liquidity and has already been scaled back; future weekly purchases will be determined by market conditions.

Perli’s comments focused on operational readiness and flexibility rather than on announcing new policy changes. He framed the Fed’s toolkit as adaptable to potential shifts in the financial system and to evolving liquidity needs in short-term funding markets.

Those remarks highlight how the Fed’s operational decisions around reserves and short-term asset purchases remain contingent on market signals, with the SOMA manager indicating both confidence in the existing framework and a willingness to adjust tools as needed.

Risks

  • Future purchase pace is contingent on market conditions, creating uncertainty for Treasury and money market liquidity.
  • Potential structural changes that permit lower reserve levels could alter reserve supply dynamics, affecting banks’ balance sheet management.
  • Adjustments to the SOMA portfolio or bill purchase program could influence short-term funding conditions and Treasury market functioning.

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