U.S. Markets

Fed's George says need to reassess impact of balance sheet

FILE PHOTO: A police officer keeps watch in front of the U.S. Federal Reserve building in Washington, DC, U.S. on October 12, 2016. REUTERS/Kevin Lamarque

(Reuters) - The Federal Reserve does not fully understand how much its ongoing reductions to its $4 trillion balance sheet may be affecting the U.S. economy, Esther George, president of the Federal Reserve Bank of Kansas City, said on Tuesday.

“We have to continually assess and reassess how that tool is affecting the economy going forward,” George said, noting that when the Fed added to its balance sheet by buying bonds, it did boost asset values including real estate and stocks. The Fed has said it is relying on short-term rates, not shifts in its balance sheet policy, to manage the economy, but George’s comment, along with remarks from other Fed policymakers recently, suggest that stance is undergoing a rethink.

Reporting by Ann Saphir; Editing by Chizu Nomiyama