Mike Shedlock

Yesterday, former fed chair Ben Bernanke said "No Need for Fed to Shrink Balance Sheet".

The Federal Reserve does not need to shrink its $4 trillion-plus balance sheet by even "a dime" for it to normalize monetary policy when the time comes, former Fed Chair Ben Bernanke said on Monday.

"The Fed has worked very carefully to figure out how to raise rates at the appropriate time," Bernanke told a monetary policy conference. "That will eventually happen - we hope it happens because that means the economy is going back to normal."

When the Fed does tighten, he said, "you can have some bumpiness" as markets potentially react to the changes. But in all, he said, "it will be a fairly normal process."

Bernanke 2010 Flashback

In 2010, Bernanke told Congress Fed is Receptive to Selling Security Holdings.

The Federal Reserve is open to selling some of the securities now on its books as part of its withdrawal from its unconventional efforts to prop up the economy, Chairman Ben S. Bernanke said Thursday, in a change of tone on how the Fed will execute its exit strategy from crisis-era interventions.

Bernanke, testifying Thursday before the House Financial Services Committee, said that "if necessary," the Fed "has the option of redeeming or selling securities" bought during the crisis. In written testimony to the same committee on Feb. 10, he was more ambiguous, stating that he did not "anticipate that the Federal Reserve will sell any of its security holdings in the near term," at least until after the Fed had begun raising interest rates and the economy had clearly begun a sustainable recovery.

Similarly, Bernanke said Thursday that "restoring the size and composition of the balance sheet to a more normal configuration is a longer-term objective of our policies."

Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.
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