Federal Reserve May Soon Slow Balance Sheet Runoff
Federal Reserve Chair Jerome Powell stated that the Fed may be nearing a "somewhat ample" reserve level, indicating a potential end to balance sheet reduction.
Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve condition.
Powell added that the Fed is closely monitoring indicators and may approach this point in the coming months, as signs of tightening liquidity conditions have begun to emerge.
- Repo rates have shown a general firming.
- Temporary pressures on selected dates have been observed.
Powell spoke at the National Association for Business Economics conference in Philadelphia, where he discussed the Fed's plan to reduce its over $6 trillion in securities held.
Author's summary: Powell hints at slowing balance sheet runoff soon.