Powell Excerpt: No Judgement Yet On Balance Sheet Composition

     WASHINGTON (MN) - The following is a response of Federal Reserve Chairman

Jerome Powell to a question from a reporter at his press conference following

Wednesday's Federal Open Market Committee meeting.

Question: The size of the balance sheet obviously matters a great deal but so

too if you follow the arguments made when the feds were purchasing these assets

does the duration of those holdings?  So once you have reached the terminal

level of reserves and you have to reinvest maturing mortgage backed securities

in to treasuries, it will matter a great deal of course where along the cure of

the fed resumes those investments. 

     So I wonder, what does your staff research show about the degree of

accommodation that would be provided by either moving to the front end of the

curve and holding over investing perhaps in shorter maturity assets versus the

other approach that was identified in the December meeting minutes which would

be to simply reflect issuance of the outstanding treasure maturities. And which

approach do you think is more appropriate in the current environment?

Powell: These are great yes questions. The question of the ultimate composition

of our balance sheet in the longer run is (inaudible) and one that we see

ourselves as coming to fairly soon. As in coming meetings. It won't be the first

thing we work on but one of the first things that we try to resolve.

     We've had discussions at one of the last two meetings on this. And we

haven't come to a judgment on that. And I wouldn't comment beyond saying that we

understand that's a key question and there are, you know, issues to be decided,

there are benefits and costs to taking different approaches, and I wouldn't want

to prejudge them today

--MNI Washington Bureau; +1 (973) 494-2611; email: harrison.clarke@marketnews.com

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