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Fed to finalise plans to end balance sheet runoff 'at coming meetings': Mester

Reuters  |  CINCINNATI 

(Reuters) - The will chart plans to stop letting its bond holdings roll off "at coming meetings," Loretta said on Tuesday, signalling another major policy shift for the after pausing hikes.

"At coming meetings, we will be finalising our plans for ending the balance-sheet runoff and completing balance-sheet normalization," said in remarks prepared for delivery in "As we have done throughout the process of normalization, we will make these plans and the rationale for them known to the public in a timely way because transparency and accountability are basic tenets of appropriate monetary policymaking."

The built up its balance sheet in the aftermath of the 2007-2009 financial crisis, buying trillions of dollars of bonds in an effort to push down longer-run borrowing costs after it slashed short-term borrowing costs to near zero.

It began retreating from its crisis-era policy in 2015, first by raising interest rates and then in October 2017 by allowing its balance sheet to slowly shrink by no longer replacing all maturing bonds with an equal amount of new bonds. The monthly runoff was capped at $50 billion to minimize any impact on financial markets.

But late last year, prominent investors took to blaming the Fed's balance sheet runoff for market volatility.

took up the drum beat against the program in December, tweeting at the Fed to "stop with the 50 B's," a reference to the $50 billion monthly cap.

Fed said in late January that could wind down its asset-shedding operation sooner than thought and end that process with a bigger balance sheet than earlier anticipated. The Fed also said it would be "patient" in determining whether to raise rates further.

In recent weeks policymakers have signalled other changes may be in the offing.

On Friday, said policymakers were considering whether they to use bond purchases not just as a last resort in a financial crisis but perhaps even before the Fed has done as much as it can with rate cuts alone.

(Reporting by Trevor Hunnicutt; Editing by Leslie Adler)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Wed, February 13 2019. 05:05 IST