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Dudley, William C. on 2017 February 15 at 19:15

To the extent that we do decide at some point in the future to taper or end reinvestments, that will also be a way of removing accommodation, so that will be a bit of a substitute for raising short term interest rates.  That might actually stretch out the process of [rate hikes].

Forecasts from Fed officials suggest three rate hikes are expected this year, at which point they could consider to begin trimming the $4.5-trillion portfolio of bonds the central bank amassed in the wake of the financial crisis. Asked about this timing, Dudley said he would want to delay shrinking the portfolio until he is more confident that rate cuts would not be needed. "To the extent that we do decide at some point in the future to taper or end reinvestments (of maturing bonds), that will also be a way of removing accommodation, so that will be a bit of a substitute for raising short term interest rates," he said. "So ... that might actually stretch out the process of" rate hikes, he added. Dudley, William C.

Cornell University

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