As a result, after nearly $ trillion of agency MBS reinvestment purchases—due in large part to refinancing activity among U.S. homeowners—there will be no agency MBS reinvestments for the first time since September 2011. In my remarks, I will first review progress on the FOMC’s program to normalize the stance of monetary policy, which so far has shown that the Federal Reserve’s monetary policy implementation framework continues to provide appropriate control over the federal funds rate and other short-term rates. I will focus on the balance sheet and discuss the drivers of the longrun balance sheet size and composition. Next, I will review the relationship between reserve levels, which fall as the portfolio declines, and short-term interest rates. Then, I will discuss the technical adjustment to the rate of interest paid on reserves (IOR), which the Federal Reserve made in June to provide greater comfort that the effective federal funds rate (EFFR) would remain within the target range set by the FOMC. 5 I will discuss how this adjustment had exactly the intended effect on money market conditions, and how it has reinforced my certainty that the Federal Reserve is well positioned to maintain the public’s high confidence in its ability to appropriately control overnight interest rates. 1 I would like to thank Linsey Molloy and Kathryn Chen for their assistance in the preparation of these remarks, Darrian Robinson and Anne Chen for their assistance with data, and colleagues in the Federal Reserve System for insightful comments and suggestions.
Before I address the benefits of EMU and the stability-oriented policies that have to be implemented to ensure that these benefits are achieved, let me briefly mention the main institutional bodies involved in the formulation and implementation of the single monetary policy. Monetary policy is determined by the Governing Council of the European Central Bank (ECB), which consists of the eleven governors of the national central banks (NCBs) of the participating Member States and the six members of the Executive Board of the ECB. The implementation of the single monetary policy is the responsibility of the Eurosystem, which is comprised of the ECB and the eleven NCBs of the participating Member States. The Executive Board of the ECB is a separate decision-making body. Its role is to ensure that the tasks conferred upon the European System of Central Banks (ESCB) are implemented, either through its own activities or through the NCBs. Economic growth - the benefits of EMU I should now like to address the benefits of EMU and why I believe that the introduction of the euro and the single monetary policy can result in higher economic growth in the euro area and thereby contribute positively to the development of the world economy. Of course, the degree to which these benefits are achieved depends not only on the monetary policy of the Eurosystem but even more so on accompanying stability-oriented fiscal policies and appropriate labour market policies.