NEW YORK (Reuters) - New York Federal Reserve President John Williams on Monday defended the bank’s handling of volatility in money markets last week, saying officials anticipated the liquidity crunch and were successful in easing the markets.

FILE PHOTO: John C. Williams, president and CEO of the Federal Reserve Bank of New York speaks to the Economic Club of New York in the Manhattan borough of New York, U.S., March 6, 2019. REUTERS/Lucas Jackson

Williams also emphasized the need for urgency for financial firms to move away from using Libor, a benchmark that is being phased out in a few years. The bank president spoke in New York at a Treasury markets conference attended by regulators, financial firms and other market experts.

“We were prepared for such an event, acted quickly and appropriately, and our actions were successful,” Williams said.

His remarks followed a week of unusual volatility in the overnight lending markets for cash - a typically sleepy part of financial markets.

The New York Fed had to intervene and inject billions of dollars of cash into the financial system to address a shortage in the cash available to help banks finance their short-term funding needs. The repo rate, a key measure of liquidity in the global banking system, shot up to 10% on Tuesday, or more than four times the federal funds rate.

Williams said on Monday that officials anticipated some developments that were expected to reduce liquidity, including quarterly corporate tax payments and the settlement of Treasury auctions, but said the reaction in the repo market was “outside of recent experience.”

Repo rates returned to more normal levels after the Fed made multiple rounds of repo operations. On Friday, the bank said it would keep pouring tens of billions of dollars a day into the U.S. banking system through early October.

“These actions had the desired effect of reducing strains in markets,” he said.

Williams also urged financial firms to finalize their plans for replacing Libor, a benchmark that is linked to $200 trillion in financial contracts. The rate, which was tainted after it was revealed that financial firms rigged the rate to steal billions of dollars in profits, could be eliminated by the end of 2021 but banks have been slow to move to a replacement benchmark.

“We are now 831 days away from that world, and while some institutions are making good progress, others are sticking their metaphorical heads in the sand, hoping the issue will go away,” Williams said.

The central bank official said the New York Fed is taking steps to make it easier for firms to potentially use the Secured Overnight Financing Rate, or SOFR, as a replacement benchmark. The New York Fed is preparing a SOFR index and aims to publish average SOFR rates daily by the middle of next year.

The SOFR rate, which measures the costs of borrowing cash overnight, is viewed by some investors as a more reliable benchmark because it is based on more volume of trading than the Libor.

Williams stressed that banks should not wait to adjust the loans and investments that are tied to Libor.

“There’s no one-size-fits-all approach for closing out or converting existing LIBOR positions so market participants need to get ahead of this issue,” he said. “A lot of progress has been made, but there’s still much to do.”