Bowman, in remarks prepared for delivery to a Bank of Japan conference in Tokyo, said she believes commercial bank reserve levels at the Fed remain abundant,...
FILE PHOTO: Federal Reserve Board Governor Michelle Bowman at a conference on monetary policy at The Hoover Institution in Palo Alto - Federal Reserve Governor Michelle Bowman on Tuesday said she would have supported either waiting to start slowing the run-off in the U.S. central bank's balance sheet or a more moderate tapering process than announced earlier this month.
The level of reserves that banks hold at the Fed is a key consideration for determining the overall size of the central bank balance sheet, which has shrunk from around $9 trillion in 2022 to about $7.4 trillion now through a process commonly known as quantitative tightening. Officials do not want to see a repeat of what occurred in September 2019, when they reduced the balance sheet too much and triggered a bout of volatility in short-term funding markets.
The Fed has held its benchmark interest rate in a range of 5.25% to 5.50% since last July, and officials recently have indicated they are in no rush to begin rate cuts because inflation has proven stickier than they had estimated.
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