NEW YORK (Reuters) - The Federal Reserve is still discussing options for shrinking its $4.5-trillion bond portfolio and, once that begins, the central bank could “intervene” in the process if necessary, Philadelphia Fed President Patrick Harker said on Tuesday.
“If something happens, of course we’ll intervene, but we fundamentally want to push the start button and leave it to churn slowly away,” Harker said at a Market News International conference. “We’ll still discuss the balance sheet in (regular policy) meetings, but if things are good, we’ll leave it to gradually unwind in the background.”
The comments largely reflect both Harker’s and most other Fed officials’ stated approach to shedding bonds, a plan that has been partially announced even while investors eagerly await details on the pace and sequence with which the balance sheet will shrink.
The Fed amassed the assets to spur economic growth in the wake of the 2007-2009 recession and financial crisis.
Harker, a centrist who votes on monetary policy this year under a rotation, added: “There are different options under discussion.” He also repeated an expectation for two more interest-rate hikes, and to begin shedding the bonds, this year.
Reporting by Jonathan Spicer; editing by Diane Craft