Fed's Williams: Expects to start bond purchases soon.

On November 8, Fed's Williams stated on Friday that the Fed decided last week to stop reducing its bond Holdings and may soon need to expand its balance sheet through asset purchases. Williams said, “The next step in the balance sheet strategy will be to assess when reserve levels move from currently slightly above adequate to adequate.” He added that once this occurs, “it will be time to initiate a gradual asset purchase process.” Williams also mentioned, “Based on recent ongoing pressures in the repo market and other signs indicating reserves are transitioning from adequate to slightly above adequate, I expect we will soon reach adequate reserve levels.” Some analysts anticipate that the Fed may start expanding its asset size through asset purchases in the first quarter of next year. Williams warned that it is difficult to accurately determine the specific timing. “I am closely monitoring various market indicators related to the federal funds market, repo market, and payment-related metrics to help assess reserve demand conditions.” He also cautioned that maintaining adequate Liquidity through asset purchases is not a stimulus measure. (Jin10)