N.Y. Fed’s Chair Says, Fed may Start Balance Sheet Trimming Soon

New York Fed chair John Williams
New York Fed chair John Williams

New York Fed chair John Williams on Saturday said that the central bank may start trimming balance sheet in its May 3-4 meeting to address almost particularly acute inflation risks. Williams holds the position of vice chair and is also a permanent voter on monetary policy.

Williams flagged the possibilities that the federal reserve will now start tightening financial situations by letting its $9 trillion portfolio of mortgage-backed securities and Treasury bonds decline every month.

Williams stated, “This process of reducing the size of the balance sheet can begin as soon as the May (Federal Open Market Committee) meeting.”

Williams mentioned that the central bank’s greatest challenge is inflation running at 6.5%, which is 4.5% more than the Fed’s 2% target.

Williams said, “Uncertainty about the economic outlook remains extraordinarily high, and risks to the inflation outlook are particularly acute. These actions should enable us to manage the proverbial soft landing in a way that maintains a sustained strong economy and labor market. Both are well positioned to withstand tighter monetary policy.”