Fed’s Logan backs first slowing, then gradually ending, balance-sheet runoff

The Federal Reserve should first slow the pace of its balance-sheet reduction and then gradually end the program, to reduce the likelihood of having to stop it abruptly, Dallas Fed President Lorie Logan said Saturday. “Normalizing the balance sheet more slowly can actually help get to a more efficient balance sheet in the long run by smoothing redistribution and reducing the likelihood that we’d have to stop prematurely,” Logan said, in a talk at the American Economics Association meeting in San Antonio, Texas.

Logan didn’t give any hint of when the Fed might end its balance-sheet reduction. Also read: Fed’s Logan won’t take possibility of another rate hike off the table ‘just yet’ She said the Fed should slow the balance-sheet shrinkage when overnight reverse repo balances fall to a low level. The Dallas Fed president endorsed a discussion in coming weeks “to consider the parameters” that will guide any decision to slow the runoff of the balance sheet. The decision to consider the metrics of slowing the pace of balance-sheet runoff was first disclosed last week in the minutes of the Fed’s December meeting.  Since the summer of 2022, the Fed has been rapidly letting almost $100 bil …

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