November 01, 2023 19:05 GMT
FOMC Not Considering Changing Pace of Balance Sheet Runoff
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- Q: You said you need "slower" growth, you used to say "below potential" growth, has that changed? Are you saying all meetings are live, is each meeting going to be a subjective judgment?
- A: The Dot Plot is a picture in time - when things change, the forecast could change. The efficacy of the Dot Plot probably decays in the 3 month period between meetings. We personally update the forecast but we don't formally update the Dot Plot.
- Potential growth has been elevated for a year or two over its trend level. People think trend is around 2%. But we've had an improvement in the size of the labor force, with potential growth rising in a catch-up growth. That means you could still be growing 2% this year and still be growing below the increase in the potential output of the economy - that's why I say it is below potential.
- We're going meeting by meeting, we're asking ourselves whether policy is sufficiently restrictive.
- Q: Have you considered changing QT program in light of higher long-end yields?
- A: The FOMC is not considering changing the pace of balance sheet runoff. I know there are many possible explanations for why rates have been going up, and QT is certainly on that list, it may be playing a small role. At $3.3T, hard to make a case that reserves are even close to scarce.
- Q: Could you expect finalizing the Basel 3 endgame capital proposal without significant changes?
- A: We are a consensus driven organization, we will come to a package that has broad support on the board.