Mester: Focused On Market Liquidity Impact Of Balance Sheet Reduction

Mester Q&A continues, answering some questions on Fed balance sheet policy:

• On the role of balance sheet reduction in setting monetary policy: Our initial approach was to set parameters for balance sheet reduction; got it going; then let it run. It will reduce accommodation. And use the Funds rate as active policy.
• I think we should be contemplating selling MBS; when we set our balance sheet reduction policy, we didn't rule it out, and didn't rule it in. I think we will have those discussions, I can't tell you when, but at some point, it probably makes sense to think about doing that so we get the composition of the balance sheet back to primarily Treasuries.
• Some reasons to think QT not symmetric with QE. But I'm more focused on whether it will impact liquidity in markets than how much balance sheet reduction is an equivalent move in the Fed funds rate.