Powell says Fed likely to end bond trimming by end of 2019
WASHINGTON — Federal Reserve Chairman Jerome Powell said Wednesday that the Fed is close to announcing a plan to end the reduction of the size of its massive bond portfolio, which looks likely by the end of the year. Powell, delivering the Fed's semiannual monetary report to Congress, faced a number of questions about the bond runoff from members of the House Financial Services Committee. The central bank boosted its holdings by more than four-fold in the wake of the 2008 financial crisis and subsequent recession, in an effort to lower long-term interest rates as it looked for unconventional ways to boost economic growth. The Fed's balance sheet hit a record high of $4.5 trillion before it began trimming the size of its holdings in October 2017. The bond purchases, dubbed quantitative easing, were heavily criticized by conservative Republicans who believed the program was giving the central bank too much power over the U.S. economy. But financial markets are now worried that if the Fed reduces its holdings too drastically, it could push long-term interest rates higher, hurting key sectors of the economy such as home building and auto sales. In his most extensive public comments on the issue, Powell told lawmakers Wednesday that the Fed has held three discussions on how to reduce its bond holdings. “We have worked out the framework of a plan that we hope to be able to announce soon,” Powell said. “It will light the way all the way to the end of the balance sheet normalization and that will result in the end of asset runoff sometime later this year.”