Cleveland Fed President Loretta Mester said Wednesday that the markets can handle front-loading of rate hikes and the start of balance sheet reduction.
Cleveland Federal Reserve President Loretta Mester on Wednesday said the Fed could continue “front-loading” interest rate hikes in the first half of this year and start to reduce the central bank’s balance sheet at the same time without causing financial market disruption.
“I... Cleveland Federal Reserve President Loretta Mester on Wednesday said the Fed could continue “front-loading” interest rate hikes in the first half of this year and start to reduce the central bank’s balance sheet at the same time without causing financial market disruption. “Your question supposes that maybe the market can’t handle both raising interest rates and the balance sheet at the same time. But I think, given the situation we’re in, and the communications that chair Powell has already made about the balance sheet process, I don’t have concerns that would be destabilizing,” she said.
One of the reasons to start reducing the Fed’s balance sheet is that the Fed doesn’t want to distort the yield curve by its actions.
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