(Reuters) – New York Federal Reserve Chairman John Williams met with Wall Street banks this week to discuss a key short-term credit line, the Financial Times reported on Friday, amid signs of tighter liquidity in the market.
“Chairman Williams convened the New York Fed’s major trading counterparties (primary dealers) to continue their commitment to the purpose of the permanent repurchase facility as a monetary policy implementation tool and to solicit feedback to ensure it remains effective for rate control,” a New York Fed spokesperson told the newspaper.
The New York Federal Reserve did not immediately respond to Reuters’ request for comment.
The meeting took place on the sidelines of the Federal Reserve’s annual Treasury market conference on Wednesday, the Financial Times said.
Roberto Perli, the official responsible for implementing monetary policy, said on Wednesday that companies that need to use the central bank’s permanent repo facility should resort to it when necessary, adding that large-scale use would not be problematic.
Ahead of the Federal Reserve meeting in October, rising money market rates, an upward trend in the federal funds rate, and use of the SRF indicated a tightening of market liquidity.
The SRF allows eligible financial companies to convert bonds into cash quickly and acts as a buffer to market liquidity needs. Adopted in 2021, the tool had until recently been largely unused.
While its use in late October was notable, it was less than some expected, and some Fed officials have said they were perplexed that more companies were not turning to the SRF but instead borrowing from the markets at rates higher than those offered by the Fed.
(Reporting by Bipasha Dey in Bengaluru; Editing by Diane Craft and William Mallard)