The signals from Federal Reserve officials indicate that the Fed is not going to move its policy rate soon.
The behavior of the Federal Reserve's balance sheet confirms this signal.
Over the past banking week, reserve balances at Federal Reserve banks, a proxy for excess reserves, posted a gain of $131 billion.
Since the end of last year, soon after the Fed's December increase in the Federal Funds target rate, the Federal Reserve has seen these reserve balances increase by almost $260 billion.
This is not the behavior of a central bank that has any intention of increasing its policy rate of interest soon.
Before the increase in the policy rate in December, the Fed had been moving since early October to tighten up on reserve balances so as to create conditions that would support an increase in the policy rate.
Most of the increase in reserve balances over the past three months has resulted from a reduction in the Fed's Reverse Repurchase Agreements. The total drop here was around $230 billion and represented a running off of repurchase agreements that the Fed had built up over previous weeks.
The Fed has used this tool, reverse repurchase agreements, since the end of October 2014 as a substitute for the outright purchase or sale of open market securities.
In face, the securities held by the Federal Reserve have only increased by just over $15 billion in the past 52 weeks, and increase has come almost solely in the purchase of mortgage-backed securities.
This is consistent with what Fed officials informed the world in terms of how it would operate in the current period of monetary policy we are now in.
The only other account that helped to increase bank was the US Treasury's General Account, which declined by $61 billion. This is not unusual this time of year as the Treasury is about to receive tax payments.
In terms of the effective Federal Funds rate, very little movement has been shown over the past week, or, for that matter over the past several weeks. The effective rate is remaining right around 37 basis points.
Basic conclusion: if the Fed were seriously thinking about raising the target range for the Federal Funds rate, it would be attempting to tighten up on reserve balances, not overseeing them increase.
This just underwrites the basic "Fed Speak" we are getting from Fed Chair Janet Yellen and others. The Federal Reserve is not going to raise the target range for the Federal Funds rate any time soon.
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