By Jonathan Spicer
NEW YORK Feb 19 The U.S. Federal Reserve should
update its longer-term "exit strategy" for winding down its
swollen balance sheet to reflect changes in the plan since it
was published in 2011, a top Fed policymaker said on Wednesday.
"It would be good to update this," San Francisco Fed
President John Williams told reporters when asked about
refreshing the strategy. "When the world changes, we have
changed our plan in an appropriate way."
He also said the U.S. central bank has made clear, for
example, that it does not intend to sell any of the assets it
has bought until perhaps "later on" as it looks to shrink the
The balance sheet is worth more than $4 trillion and
counting after three rounds of asset purchases meant to
stimulate U.S. hiring and economic growth in the wake of the
2007-2009 recession. It is now adding $65 billion worth of bonds
each month, though it intends to keep trimming the pace of
purchases to reflect a stronger economy.
In 2011, the Fed surprised some observers when it published
the so-called exit strategy for returning its balance sheet to a
more normal level of closer to $1 trillion in the years ahead,
and it formally reviewed that strategy in 2013.
According to the published plan, the Fed would halt
reinvestment of principal; then modify forward guidance on
interest rates; then raise policy target using the rate paid on
excess bank reserves; then possibly sell agency-backed
"Now that we're a couple years later, I think it would be
useful" to update the strategy as Fed policymakers come to an
agreement on the needed changes, Williams said. Changes may be
needed around timing of the holdings and the potential for asset
sales, he added.
"I think we have since made clear that we have no intention
to sell assets as part of the exit strategy except for later on,
and in fact we're going to allow the assets to roll off
naturally as they mature, or are pre-paid" in the case of
mortgage-backed securities, Williams said.
"I see it as a snapshot. Here's how we're thinking. This is