MNI POLICY: Fed Close to Finalizing Plan to End QT -Powell

By Jean Yung

     WASHINGTON (MNI) - The FOMC is nearing consensus on a plan to cease

reducing its balance sheet and will likely announce something "fairly soon,"

Federal Reserve Chair Jay Powell told lawmakers Wednesday, signaling that a

decision will be made public at the March FOMC meeting. 

     "We're close to agreeing on a plan that would light the way to the end of

the process," Powell told the U.S. House of Representatives on the second day of

his semi-annual report to Congress. 

     The ultimate size of the balance sheet will be driven by demand for bank

reserves, but the minimum level of reserves needed to control interest rates

effectively is unclear, Powell said.  

     Public estimates of around $1 trillion for that level appear to be

"reasonable," Powell said, but "We actually don't know what the equilibrium

demand will be. We're going to have to find it over time."

     Reserves are now near $1.6 trillion. The overall balance sheet has shrunk

to $4.0 trillion from $4.5 trillion at its peak in 2014. 

--MNI Washington Bureau; +1 202-371-2121; email: jean.yung@marketnews.com

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