Speaking on a panel at a NY forum
In his prepared remarks, Feds Quarles says:
- It is appropriate to keep the balance sheet big enough to buffer against most shocks to reserve supply
- On the few days when buffers exhausted, Fed could do open market operations to boost reserve supply
- Uncertainty around level reserve demand means caution is warranted
- Fed has discussed ending balance sheet runoff in later half of this year
- one option at that point would be to hold level of total assets fixed for a time
- he favors and all treasuries Fed balance sheet, reducing MBS to zero
- shortening duration may improve control online rates
- Don't expect MBS sales during balance sheet normalization
- Back balance sheet big enough to avoid frequent intervention
