NY Fed official said central bank bill buying should moderate soon

By Michael S. Derby

NEW YORK, March 26 (Reuters) - The Federal Reserve's Treasury bill buying is likely to slow notably next month, as planned, the official responsible for implementing monetary policy at the Federal Reserve Bank of New York said on Thursday.

“An adjustment to our monthly purchase pace is likely to happen soon,” said Roberto Perli, manager of the System Open Market Account.

While it is hard to say exactly what market liquidity needs will be as the financial system navigates the upcoming tax payment date, what is now around $40 billion per month in Treasury bill buying “can likely be significantly reduced after April 15,” Perli said, adding “to account for uncertainty and other factors, that reduction may be somewhat gradual.”

Perli was referring to large-scale purchases of Treasury bills the Fed embarked upon at the close of last year. The Fed said then it would buy the short-term government debt to rebuild liquidity after having just halted what had been a long-running drawdown of its balance sheet.

This so-called quantitative tightening, or QT, had been running since 2022 and aimed to remove excessive liquidity from the financial system. That allowed the Fed to reduce overall holdings from around $9 trillion to under $7 trillion.