US Federal Reserve Chairman Jerome Powell informed lawmakers that policymakers still have a lot of work to do in reducing the Fed's balance sheet, Bloomberg reports.
"We've already made a lot of progress. But we think we still have a lot to do," he said Wednesday during his second day of testimony before Congress in Washington.
The U.S. central bank has reduced its holdings by about $1.7 trillion so far, and officials expect to trim its balance sheet further as it continues to sell assets built up during the pandemic, buying Treasuries and mortgage-backed securities to stabilize markets and support the economy.
In June, the Fed slowed the pace at which it allows bonds to flow off its balance sheet, which Jerome Powell said would allow policymakers to be more careful to prevent debt stocks from falling too sharply. They want to avoid a repeat of the situation of 2019, when short-term borrowing costs increased sharply due to a lack of reserves.
The Fed chairman avoided giving clear signals about interest rate moves, stressing that policymakers need to be careful about either going too fast or going too slow. Jerome Powell's words indicate that the Federal Open Market Committee (FOMC) is unlikely to cut interest rates at its July 30-31 meeting. The Federal Reserve has kept interest rates in the 5.25-5.5 percent range for nearly a year, the highest level in more than two decades.
