One of the US Federal Reserve’s most influential officials has called for a change to its exit strategy from easy monetary policy.
William Dudley, president of the New York Fed, said the central bank should keep reinvesting in its mortgage portfolio until after it raises interest rates. The current exit strategy calls for stopping reinvestment before rates go up.
The call for the Fed to keep its mortgage portfolio larger for longer signals how exit strategy is now the most active policy debate at the central bank as the US economy gets closer to full employment. The possibility of more sustained Fed demand may boost markets for mortgage-backed securities.
Mr Dudley said that raising interest rates would give the Fed the flexibility to cut them again if the economy gets into trouble, so it is more important than reducing the MBS portfolio.
“Delaying the end of reinvestment puts the emphasis where it needs to be – getting off the zero lower bound for interest rates,” said Mr Dudley in a speech to the New York Association for Business Economics on Tuesday.
“In my opinion, this is far more important than the consequences of the balance sheet being a little larger for a little longer.”
he Fed is still buying mortgage-backed securities every month as part of its effort to drive down long-term interest rates and support the economy. When someone pays back their mortgage, the Fed reinvests the money in new MBS. Stopping reinvestment would allow its portfolio to decline gradually.
In an upbeat speech on the economy, Mr Dudley signalled he was happy with tapering Fed asset purchases at the current pace of $10bn per meeting, and with current market expectations for a first rise in interest rates in the middle of 2015.
达德利周二在纽约纽约商业经济协会(New York Association for Business Economics)发表演讲时表示：“推迟结束再投资，是把力气使在了该使的地方，那就是让利率脱离零下限。”