Press Release
June 14, 2023
Implementation Note issued June 14, 2023
Decisions Regarding Monetary Policy Implementation
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 June 14, 2023:
The Board of Governors of the Federal Reserve System voted unanimously to maintain the interest rate paid on reserve balances at 5.15 percent, effective June 15, 2023.
- As part of its policy decision, the Federal Open Market Committee voted to 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 June 15, 2023, 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 5 to 5-1/4 percent.
- Conduct standing overnight repurchase agreement operations with a minimum bid rate of 5.25 percent and with an aggregate operation limit of $500 billion.
- Conduct standing overnight reverse repurchase agreement operations at an offering rate of 5.05 percent and with a per-counterparty limit of $160 billion per day.
- Roll over at auction the amount of principal payments from the Federal Reserve's holdings of Treasury securities maturing in each calendar month that exceeds a cap of $60 billion per month. Redeem Treasury coupon securities up to this monthly cap and Treasury bills to the extent that coupon principal payments are less than the monthly cap.
- Reinvest into agency mortgage-backed securities (MBS) the amount of principal payments from the Federal Reserve's holdings of agency debt and agency MBS received in each calendar month that exceeds a cap of $35 billion per month.
- Allow modest deviations from stated amounts for 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 5.25 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.
Last Update: June 14, 2023
As an expert in monetary policy and central banking, my comprehensive understanding of the intricacies of the Federal Reserve's operations positions me to provide a detailed analysis of the recently released FOMC statement on June 14, 2023.
The Federal Reserve's decisions outlined in the statement demonstrate a strategic approach to implementing monetary policy aimed at achieving specific economic objectives. Let's delve into the key concepts and decisions presented in the release:
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Interest Rate on Reserve Balances: The Board of Governors of the Federal Reserve System, in a unanimous vote, decided to maintain the interest rate paid on reserve balances at 5.15 percent, effective June 15, 2023. This rate influences the overall cost of borrowing for financial institutions and, consequently, affects the broader interest rate environment.
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Open Market Operations: The FOMC directed the Open Market Desk at the Federal Reserve Bank of New York to undertake open market operations to maintain the federal funds rate within a target range of 5 to 5-1/4 percent. Open market operations involve buying and selling of government securities to adjust the money supply and achieve the desired interest rate levels.
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Repurchase Agreement Operations: The FOMC authorized standing overnight repurchase agreement operations with a minimum bid rate of 5.25 percent and an aggregate operation limit of $500 billion. This is a crucial tool for managing short-term interest rates and liquidity in the financial system.
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Reverse Repurchase Agreement Operations: Standing overnight reverse repurchase agreement operations were approved at an offering rate of 5.05 percent with a per-counterparty limit of $160 billion per day. This tool helps control the supply of money in the financial system.
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Treasury Securities Rollover and Redemption: The Federal Reserve plans to roll over at auction the amount of principal payments from its holdings of Treasury securities, subject to a cap of $60 billion per month. Additionally, Treasury coupon securities will be redeemed up to this monthly cap. These actions influence the maturity profile of the Federal Reserve's balance sheet.
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Reinvestment into Agency Mortgage-Backed Securities (MBS): The Federal Reserve will reinvest the amount of principal payments from its holdings of agency debt and agency MBS that exceeds a cap of $35 billion per month into agency MBS. This strategy affects the composition of the Federal Reserve's asset holdings.
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Primary Credit Rate: The Board of Governors unanimously approved maintaining the primary credit rate at the existing level of 5.25 percent. This rate influences the interest rate charged on short-term loans to depository institutions.
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Operational Tools and Approach: The statement emphasizes that information will be updated 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.
For more detailed information on open market operations and reinvestments, stakeholders are directed to visit the Federal Reserve Bank of New York's website.
In summary, the Federal Reserve's decisions, as communicated in the FOMC statement, reveal a nuanced and strategic approach to monetary policy implementation, showcasing a deep understanding of economic dynamics and financial markets.
