MNI BRIEF: Powell Says Balance Sheet Runoff Could Take 3 Years

Federal Reserve Chair Jerome Powell said Wednesday the central bank's balance sheet normalization process could take around three years and suggested the FOMC will be discussing runoff caps at its next meeting in two weeks.

"Something in the range of three years to get back to what the balance sheet needs to be, which is basically reflective of the public's demand for our liabilities plus a buffer, what we call ample reserves," he said in semiannual testimony to Congress. The size of the economy and the banking system help determine the end point of balance sheet normalization, he added.

"The way we did it last time is we set a cap on the amount we'll runoff and anything above that gets reinvested for MBS and for Treasuries. We haven't had that discussion at the Committee. We will have it in two weeks," he said.