Whenever the Federal Reserve decides to raise interest rates, it will turn to a British-born economist named Simon Potter to do the job. Potter is in charge of hitting the US central bank's target for the federal funds rate, the key interest rate that the Fed uses for monetary policy. He heads a group of traders at the Federal Reserve Bank of New York who operate from the ninth floor of the bank's imposing, Italian Renaissance-style headquarters in Manhattan. The rate-setting Federal Open Market Committee last week decided, at the end of a two-day meeting in Washington, not to raise the rate, which has been at a historic low of zero to 0.25 per cent since December 2008. Its next two meetings will be held next month and in December. Whenever it does raise, it will reflect the Fed's confidence that the economy is strong enough to withstand costlier money - and its worry that super-low rates could eventually cause inflation to rise above its 2 per cent target. That is where Potter comes in. Although there are 12 reserve banks in the Fed system, New York is primus inter pares, first among equals. Monetary policy is decided in Washington, and hundreds of economists and other Fed experts throughout the Federal Reserve System have been involved in designing new tools to carry that policy out. Ultimately, though, those tools will be put to work by Potter and his team. They operate the plumbing of the US financial system, opening and closing valves to make money flow where the Fed wants it to go. "Simon is exceptionally capable and experienced, but he and the Fed will be trying to do something that they've never had to do before," says Carl Tannenbaum, the chief economist at Northern Trust. The Fed is moving into uncharted territory. It has never tried to raise the federal funds rate when the banking system was flush with US$2.5 trillion of excess reserves, as it is now. Economists and traders are bracing for gyrations in financial markets when the New York Fed starts to tighten up the rate. The trouble is, the Fed cannot just declare the federal funds rate and make it stick. The rate is set by market forces. The only thing the Fed can do is influence market conditions to steer the funds rate towards its target. That is easy to do when federal funds are scarce and there is natural market demand for them. It is much harder today, when the funds are in massive oversupply. "There are three or four things about how the financial system works that most people didn't understand and didn't really need to understand before 2008," said Peter Stella, who led the central banking and monetary and foreign exchange operations divisions of the International Monetary Fund from 2005 to 2009. "They still don't understand them, so I think there's a lot of risk of volatility when things actually start happening." Potter is well aware of the challenge. "We don't know what's going to happen when we lift off," he said in April, answering questions after a speech to the Money Marketeers of New York University. Potter was not always a master financial plumber. Before taking over the New York Fed's Markets Group in 2012, he was its director of economic research, dealing in heavy-duty economic theory. He taught at UCLA, Johns Hopkins, New York University, and Princeton before joining the New York Fed in 1998. He has a bachelor's and a master's degree from Oxford University and a doctorate from the University of Wisconsin. Today, he also manages the System Open Market Account for the Federal Open Market Committee. "He can do both the technical, abstract, computational statistics and the practical, real-world macroeconomics (unlike me and most of my colleagues)," said Gary Koop, an expert in econometrics who has frequently collaborated with Potter on academic papers. Potter's sensitivity to "nonlinear dynamics" should be useful as he tries to carry out the committee's wishes. Brian Sack, the director of global economics at hedge fund D.E. Shaw, who preceded Potter in the job, says nimbleness will be key. "The desk will need some flexibility to respond to market developments in order to meet its objective of controlling short-term interest rates," Sack says. "Simon has done everything you would expect to prepare for using these tools."