Yellen reiterates plan to reduce Fed balance sheet ‘this year’

Federal Reserve Chair Janet Yellen discussed the current economic outlook and reiterated her expectations for the Fed to start tapering its balance sheet “this year” as she delivered the Fed’s semiannual monetary policy report to the House Financial Services Committee Wednesday.

“The Fed has mapped out a course for monetary policy in the second half of the year, which likely involves beginning to wind down asset holdings in September and another rate hike in December,” said NAFCU Chief Economist and Director of Research Curt Long. “Of the two, the latter is less certain.

“Weakening inflation is a concern for many of the [Federal Open Market Committee] members, and although Chair Yellen has stated on more than one occasion that she sees this as owing to temporary factors, a continued slide in price growth would likely result in a delay until 2018 for any rate moves.”

The Q&A portion of Wednesday’s hearing was heavily focused on regulation. On more than one occasion, Yellen said community banks and credit unions should be provided regulatory relief, and she said she agreed with many aspects of the Treasury report addressing opportunities for credit unions and banks.


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