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Fed Chair Powell Delivers Semiannual Monetary Policy Report At Senate Hearing
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The Federal Open Market Committee had an unscheduled meeting on October 4. That happens occasionally and they often don’t reveal it occurred until the next regular meeting. That would mean Oct. 30, in this case.

But for some reason (and you can bet they had a reason) they decided to announce this one on Oct. 11.

In between, Fed Chair Jerome Powell said in an Oct. 8 speech that the Fed would soon start growing its balance sheet again.

He characterized the move not as QE, but as a more permanent operation to make sure the Fed has enough reserves to deal with market volatility.

Why Do We Need Nuclear Weapons to Swat Flies?

To be fair, let’s read Powell’s own words, with my emphasis in bold.

In mid-September, an important channel in the transmission process—wholesale funding markets—exhibited unexpectedly intense volatility. Payments to meet corporate tax obligations and to purchase Treasury securities triggered notable liquidity pressures in money markets. Overnight interest rates spiked, and the effective federal funds rate briefly moved above the FOMC's target range. To counter these pressures, we began conducting temporary open market operations. These operations have kept the federal funds rate in the target range and alleviated money market strains more generally.

While a range of factors may have contributed to these developments, it is clear that without a sufficient quantity of reserves in the banking system, even routine increases in funding pressures can lead to outsized movements in money market interest rates. This volatility can impede the effective implementation of monetary policy, and we are addressing it. Indeed, my colleagues and I will soon announce measures to add to the supply of reserves over time. Consistent with a decision we...

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