New York Fed: Fed balance sheet a key tool for monetary policy and financial stability

The New York Fed said in an article on Tuesday, the Fed's balance sheet is a "key tool" to support the FOMC's monetary policy objectives, and in "rare cases to support financial stability". The Fed sets its monetary policy stance primarily by adjusting the target range for the federal funds rate, but the FOMC has also previously purchased U.S. Treasuries and agency mortgage-backed securities (MBS) to help ease overall financial conditions, especially when interest rates are around zero. Such purchases have also been used to address market dysfunction, such as in March 2020 when the new crown epidemic disrupted financial markets. The FOMC also directed the Fed to reduce the size of its balance sheet and holdings to a level "consistent with the efficient and effective conduct of monetary policy under an ample reserve facility," write Christian Cabanilla, Eric LeSueur and Josh Younger of the New York Fed. .