UPDATE 1-Fed's T-bill purchases to stay at $60 bln for next month -NY Fed

(Adds context)

Nov 14 (Reuters) - The Federal Reserve Bank of New York on Thursday said it will purchase $60 billion in short-term Treasury bills through mid-December, keeping up the same pace for the balance sheet expansion program it launched last month in an effort to shore up liquidity in money markets.

The Fed began purchasing Treasury bills in mid-October to increase the level of reserves in the banking system and minimize volatility in money markets. The program was launched in response to a liquidity crunch in mid-September that caused borrowing rates in short-term lending markets to spike to 10%.

The central bank calmed markets by conducting daily operations in the market for repurchase agreements, or repo. Officials said they would continue the daily cash injections through January.

The asset purchases, combined with the daily repo operations, are meant to ease liquidity needs through the end of the year, when deadlines for tax payments and Treasury settlements could increase demand for cash.

The end goal is to bring reserves back to about $1.5 trillion, the level seen in mid-September before the volatility began, New York Fed President John Williams said earlier Thursday in San Francisco.

Fed officials are looking into the factors that may have restricted some financial firms from lending cash when demand was high and are working on a solution, he said.

"We are going to have to do a lot of work with the industry, thinking about whether its how regulations and supervisions affect liquidity in these markets, but also how the institutional structures matter," he said. "This is a topic that we are going to continue to work on."

(Reporting by Jonnelle Marte in New York; Additional reporting by Ann Saphir in San Francisco. Editing by Chris Reese)