Fed Prepared to Evaluate the End of the Balance Sheet Runoff: Powell

Investing.com – Federal Reserve Chairman Jerome Powell indicated that the central bank is currently ready to consider the timing for an end to the reduction of its balance sheet, known as quantitative tightening, and remains prepared for any action given developments.

“The Committee can now evaluate the appropriate timing and approach for the end of balance sheet runoff,” Powell said in testimony prepared for delivery to the U.S. Senate Banking Committee on Tuesday.

“I would note that we are prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments,” he added.

Powell further noted that the longer-run size of the balance sheet would be determined by the demand for Federal Reserve liabilities such as currency and bank reserves.

The Fed has pulled an almost complete about-face from just the end of last year when it hiked interest rates and forecast two further increases for 2019.

Fed members went so far in January as to remove wording referring to expectations for “gradual increases” in interest rates from its policy statement.

Since that decision, several policymakers had already suggested that the Fed could put an end to its balance sheet runoff.

Fed Vice Chairman Randal Quarles suggested last week that the pause could come “sometime in the latter half of this year with still-ample reserves in the system” and then “remain on hold for some time.”

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