New York Fed President williams announced on Thursday the establishment of an institution composed of private market participants to oversee the usage of benchmark interest rates (i.e. reference rates) in the entire financial market.

Williams stated in the opening speech of the 10th Annual U.S. Treasury Market Conference at the New York Fed that the Reference Rate Utilization Committee will begin meeting in October, focusing on key issues related to reference rates, including how their usage is evolving and that the markets supporting them may also be changing.

He mentioned that this group convened by the New York Fed will also promote 'best practices' related to the use of reference rates, including recommendations made by the Alternative Reference Rates Committee supported by the Federal Reserve. Reference rates are used as standards for setting other rates.

Williams did not comment on the economic outlook or monetary policy.

Williams stated that the motivation behind establishing this new group comes from the lessons learned during the transition from the London Interbank Offered Rate (Libor), one of the most important market reference rates in the past half-century. Evidence emerged in 2008 indicating that loan institutions in Europe and the United States had manipulated rates for their benefit, tarnishing this benchmark rate.

In the United States, the Alternative Reference Rates Committee chose to create a new benchmark interest rate, the Secured Overnight Financing Rate (SOFR). The New York Fed proposed modifications to the calculation methodology of SOFR in July.

Williams said, 'This work will complement international efforts by the Bank for International Settlements (BIS) and the Financial Stability Board (FSB) to monitor the progress of benchmark rate usage and ensure that we no longer have to face issues like Libor.'

In addition, Federal Reserve Board member Bowman also delivered remarks on economic outlook and monetary policy, with content almost identical to those made at the Kentucky Bankers Association on September 24th.

Regarding regulation, Bowman pointed out that the discount window is designed for emergency situations, and the purpose of the discount window's use is not the same as the Federal Home Loan Banks' loans. It is important to recognize that there are some drawbacks to discount window borrowing, and it is crucial to modernize the discount window. The Fed's supervision should focus on core risks. She stated, "We are not responsible for ensuring that every bank can continue to exist."

Bowman said, "I hope the Fed's balance sheet remains as small as possible."

Bowman is very satisfied with her different views from the majority of FOMC members. She said, "Federal Reserve policymakers should be able to express different opinions. I hold different opinions from many in the FOMC on how people, banks, and businesses operate in the economy. Having served on the committee for a long time, I have become more confident in my views."

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