Fed Dials Back Reserve Management Purchases to Zero

The Federal Reserve has announced that it will halt Reserve Management Purchases (RMPs) for the period of August 14 through September 14. This move comes after the Fed had already tapered RMPs to $10 billion a month, including for the current period through August 13.

RMPs were introduced in mid-December and aimed at increasing reserve balances to deal with liquidity distortions associated with Tax Day on April 15. The Fed would purchase $40 billion of Treasury bills (Treasury securities with terms of 1 year or less) during the mid-month to mid-month periods.

However, after tapering RMPs to $10 billion a month, the Fed has now decided to cut them to zero. This decision was suggested by FOMC Chair Warsh at his first meeting on June 17.