Implementation Note issued January 26, 2022

January 26, 2022 | Posted by: John Murphy

Decisions Regarding Monetary Policy Implementation

Implementation Note issued January 26, 2022

The Federal Reserve has made the following decisions to implement the monetary policy stance announced by the Federal Open Market Committee in its statement on January 26, 2022:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 0.15 percent, effective January 27, 2022.
• As part of its policy decision, the Federal Open Market Committee voted to authorize and direct the Open Market Desk at the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the System Open Market Account in accordance with the following domestic policy directive:

"Effective December 16, 2021, the Federal Open Market Committee directs the Desk to:

• Undertake open market operations as necessary to maintain the federal funds rate in a target range of 0 to 1/4 percent.

• Complete the increase in System Open Market Account (SOMA) holdings of Treasury securities by $40 billion and of agency mortgage-backed securities (MBS) by $20 billion, as indicated in the monthly purchase plans released in mid- January.

• Increase the SOMA holdings of Treasury securities by $20 billion and of agency MBS by $10 billion, during the monthly purchase period beginning in mid-February.

• Increase holdings of Treasury securities and agency MBS by additional amounts as needed to sustain smooth functioning of markets for these securities.

• Conduct overnight repurchase agreement operations with a minimum bid rate of 0.25 percent and with an aggregate operation limit of $500 billion; the aggregate operation limit can be temporarily increased at the discretion of the Chair.

• Conduct overnight reverse repurchase agreement operations at an offering rate of 0.05 percent and with a per-counterparty limit of $160 billion per day; the per-counterparty limit can be temporarily increased at the discretion of the Chair.

• Roll over at auction all principal payments from the Federal Reserve's holdings of Treasury securities and reinvest all principal payments from the Federal Reserve's holdings of agency debt and agency MBS in agency MBS.

• Allow modest deviations from stated amounts for purchases and reinvestments, if needed for operational reasons.

• Engage in dollar roll and coupon swap transactions as necessary to facilitate settlement of the Federal Reserve's agency MBS transactions.'

• In a related action, the Board of Governors of the Federal Reserve System voted unanimously to approve the establishment of the primary credit rate at the existing level of 0.25 percent.

This information will be updated as appropriate to reflect decisions of the Federal Open Market Committee or the Board of Governors regarding details of the Federal Reserve's operational tools and approach used to implement monetary policy.

More information regarding open market operations and reinvestments may be found on the Federal Reserve Bank of New York's website.

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