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Mester, Loretta J. on 2017 July 6 at 17:00

I don’t think there’s anything, like, fundamental that says you couldn’t do both [asset sales and rate hikes] at the same time.

I don’t think there’s anything, like, fundamental that says you couldn’t do both [asset sales and rate hikes] at the same time, alright? So really what we do with our funds rate path depends on what the economy is doing and how we see the outlook, etc. The balance sheet, again, because the change in the reinvestment policy is such a gradual one (other than the signaling effect that it might have — which we’re hoping that the communication is handling) there isn’t any reason not to start that early, just because it’s a very slow reduction in the size of the balance sheet. And to get the balance sheet down significantly it’s going to take several years. I mean, it’s not like something that’ll change overnight. … So again, that’s sort of in the background, right? It’s not really an active, what I would say, policy tool at this point. The idea was set it and forget it—you know, like that old Ronco ad. You know, right? You just sort of do it, set it, let it go in the background. And then our main policy tool, of course, is going to be the short-term interest rate. And that’s the way I view it. And so could we do both at the same time? Sure. It depends on what the economy is doing. Mester, Loretta J.

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