Federal Reserve's Harker: Fed can continue to steadily shrink its balance sheet, does not support rate hikes

On February 28, the Cleveland Fed President, Haamack, believes that during a period of fiscal uncertainty, the Fed can continue to steadily reduce its balance sheet. At the same time, she pointed out that even if inflation pressures do not dissipate quickly enough, she is not inclined to support rate hikes. Haamack stated that her ‘Benchmark preference’ is for the Fed to continue to advance balance sheet reduction, while the government organizes its spending plans and adjusts the debt ceiling to meet its borrowing needs. Haamack said in an interview on Thursday that once the fiscal path is clear, if there is a structural imbalance in market Liquidity, temporary repurchase operations can be used to ‘reinject Liquidity into the system until market demand becomes clear.’ She also stated that if inflation pressures remain above the 2% target, she does not expect rate hikes, but the possibility of rate hikes is not zero. So far, ‘I think (expectations) are still stable.’