The Federal Reserve is near the end of interest rate increases and the program for reducing the bonds it holds on its balance sheet, St. Louis Fed President James Bullard said on Thursday.
"I thought at the December meeting," I thought, it was a step too far. I argued against that move, "Bullard said. "I think the market began to think that we were too hawkish, may cause a recession."
"I think all of this was weighed on the committee and got people to change their thinking, "he added.
Indeed, 2019 has seen a pivot in Fed thinking, with minutes from the January FOMC meeting, released Wednesday, detailing the concerns officials had over the economy's future path and the impact of the committee's moves on how things develop
In addition to a steady diet of rate hikes, the Fed was reducing the size of a bond portfolio it had built up during its efforts to stimulate the economy during and after the financial crisis. The balance sheet had surged to more than $ 4.5 trillion, but the Fed has since reduced bond holdings by more than $ 400 billion, allowing some proceeds from the assets to roll every month without reinvesting.
The minutes indicated that the Fed It will likely bring the balance sheet roll-off to the end of 2019 as reserves become closer to the level where banks feel comfortable.
At the same time, officials have indicated during the meeting that they will now take "a patient
Bullard said he expects a timetable for the balance sheet program to be revealed "in the next couple of months."
"I think we "Re in a good place today," he said. "We had a lot of success. People said it could not be done."
While U.S. Interest rates are historically low, they are really high compared to the rest of the word, Bullard said. That's part of the reason why he thinks rates could be cut.
"I actually think we're a bit tight here, a little bit too high with rates," he said. "
As far as the balance sheet is concerned, Bullard said he was surprised that there is a high demand for bank reserves, which means the bond portfolio can stay at a higher level. "That's going to mean a bigger balance sheet, that's for sure," he said.