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Fed’s Brainard Forecasts Methodical Rate Hikes, Faster Balance Sheet Reduction

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Federal Reserve Governor Lael Brainard stated the task of reducing inflation pressures is paramount, stating the central bank could begin balance sheet reduction next month.

Source: Bloomberg

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Brainard stated that the Federal Open Market Committee would continue to tighten monetary policy through a series of interest rate hikes and start to reduce the balance sheet at a rapid pace as soon as on May meeting.

Brainard further stated that she expects the balance sheet to reduce significantly more rapidly than in the prior recovery, with larger caps and a much shorter period to phase in the maximum caps compared with the previous period.

The US central bank winded up asset purchases last month and hiked interest rates by a quarter percentage point.

Brainard’s comments indicated the significance of reducing the balance sheet to the FOMC’s sense of tightening.

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