DALLAS May 19 The Federal Reserve's reverse
repo tool should be a part of the central bank's toolkit when it
starts raising interest rates, a top Fed policymaker said on
Monday, adding that it has proven to be effective in draining
reserves from the banking system.
The Fed has traditionally targeted the fed funds rate, the
overnight lending rate between banks, to set monetary policy.
The Fed is currently analyzing and debating whether it should
continue to target that rate or adopt another target, San
Francisco Fed President John Williams told reporters after a
monetary policy conference at the year-old George W. Bush
Presidential Center in Dallas.
"The question really is, how is the best way to implement
monetary policy going forward," Williams said. Even if the Fed
continues to use the fed funds rate as its main policy lever, he
said, it should incorporate the reverse repo rate in its
"Reverse repo is hugely important no matter what we do," he
(Reporting by Ann Saphir; Editing by Chris Reese)