Fed's Fisher wants to revisit borrowing
Bloomberg
Richard Fisher, president of the Federal Reserve Bank of Dallas.
Federal Reserve Bank of Dallas President Richard Fisher said Wednesday he'd like the U.S. central bank to revisit its recently revised plans for raising borrowing costs in way that could help ease conditions in the bond market.
In remarks in Dallas, Mr. Fisher, who will retire from the Fed next March, said he'd like the central bank to think again about its current plan to stop reinvesting the proceeds of maturing Treasury and mortgage bonds into new holdings only after it begins to raise short-term interest rates.
'It strikes me that given current circumstances, it would do no harm to start slowly trimming our holdings by letting them roll off as they mature,' Mr. Fisher said.
The Fed's ongoing reinvestment process is designed to keep its $4.5 trillion balance sheet size steady. If it didn't buy new securities with the proceeds of its maturing holdings, the balance sheet would automatically begin to shrink. For many policy makers and market participants, a shrinking balance sheet would represent a de facto shift in Fed policy to a more restrictive stance, even if short-term rates are left at their current near-zero levels.
In a plan updated in September, the Fed said the reinvestment process would stop only after the Fed begins to raise short-term rates, something key central bankers expect to begin in the middle of next year.
An expanded version of this report appears on WSJ.com.
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