Federal Reserve chairman Jerome Powell on Tuesday flagged openness to further rate cuts amid global economic risks, and said the time to allow the Fed’s asset holdings to begin to expand again “is now upon us” in order to ensure money markets function smoothly.
The Fed had been shrinking its balance sheet in recent months as it unwound crisis-era bond buying programs. The fact that it will begin growing again should not be read as an effort to stimulate the economy, Powell said, but rather to meet the public’s demand for cash, bank demand for reserves and to carry out other core Fed functions.
In his comments here to the National Association of Business Economists, Powell did not commit to further rate cuts, and noted that the economic outlook remained “favourable” and continued growth “most likely.” But he noted that over the course of the past year central bank officials “have shifted our views about appropriate monetary policy toward a lower path for the federal funds rate,” and already reduced rates by half a percentage point.
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