(Sept 22): Federal Reserve Bank of New York president John Williams said the shift to central clearing for US Treasuries and Treasury-collateralised repurchase agreements was ahead of schedule.

“In anticipation of upcoming deadlines, the industry has already begun expanding infrastructure for cleared repo and cash trading, and activity has been shifting from uncleared to cleared markets ahead of schedule,” Williams said. 

The process requires eligible secondary-market transactions in US Treasuries, repo and reverse repo agreements to be cleared through a central counterparty.

The New York Fed chief also reiterated his view that the central bank’s current framework of holding an “ample” level of bank reserves has proven “highly effective” at making sure market rates stay within the Fed’s benchmark fed funds target range, as well as supporting the functioning of financial markets.

He said the Fed was committed to an elastic supply of bank reserves.

“If underlying demand for reserves shifts due to changes in regulation, market structure or any other reason, the Federal Reserve will match that with a shift in the supply of reserves over time,” Williams said.

In the decades after the 2008 financial crisis, the central bank adopted a framework designed to keep enough cash flowing through the banking system so that lenders can meet regulatory and settlement needs. Late last year, the Fed stopped the runoff of its balance sheet and began holding reserve management purchases to hold bank reserves within its desired “ample” level. 

Fed officials voted unanimously last week to raise interest rates by a quarter percentage point, the first increase since 2023. Updated economic projections also showed growing support for a series of hikes, with 16 policymakers favoring at least one more increase this year. Williams didn’t comment on monetary policy.

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