Fed's Perli says balance sheet run down still has a ways to go
© Reuters. FILE PHOTO: People walk by the Federal Reserve Bank of New York in the financial district of New York City, U.S., June 14, 2023. REUTERS/Shannon Stapleton//File Photo - The Federal Reserve is not close to the point where it will need to slow or stop its balance sheet wind down process, and it remains unclear right now when that will need to happen, the New York Fed’s head of monetary policy implementation said Tuesday.
While the Fed is confident it can manage the process smoothly, “we know that the transition from abundant to ample will occur at some point, but we don’t know when. For now, that moment does not seem to be on the horizon,” Perli said. “We are cognizant of the challenges that transition can present, and the experience of September 2019 exemplifies them well,” Perli noted. Then, officials faced an unexpected shortage of reserves that caused money market rates to surge, which then forced the Fed to borrow and buy Treasuries to restore market liquidity levels.
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