Federal Reserve Balance Sheet Strategy: Powell's Stance

Fed Chair Jerome Powell has clarified that the Federal Reserve is not pausing the runoff of its balance sheet and can continue to cut rates simultaneously. He emphasized that both actions are forms of normalization and can coexist while reserves stay stable.

Federal Reserve Chair Jerome Powell confirmed Wednesday that the central bank is not considering halting the runoff of its balance sheet. Despite concerns, Powell assured that the Fed could manage both balance sheet reduction and rate cuts simultaneously.

During a news conference, Powell indicated that the recent decline in the Fed's balance sheet resulted largely from overnight borrowings. He stated, 'We're not thinking about stopping runoff because of this at all. We know these two things can happen side by side.'

Powell described both actions as forms of normalization, confirming that the Fed could maintain stability while enacting these policies concurrently.

(With inputs from agencies.)