Fed’s Brainard Says Balance Sheet Reduction to Happen Rapidly

The speech comes a day before the Federal Open Market Committee will release minutes of its March meeting that will provide more details about the central bank's plan.

AccessTimeIconApr 5, 2022 at 6:44 p.m. UTC

Helene is a U.S. markets reporter at CoinDesk, covering the US economy, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

Current inflation is “much too high” and getting it down is of “paramount importance,” Federal Reserve Governor Lael Brainard said in a speech Tuesday.

“The committee will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace as soon as our May meeting,” Brainard said in a speech at the Federal Reserve Bank of Minneapolis.

The speech comes a day before the Federal Open Market Committee (FOMC) will release minutes of its March 15-16 meeting in which members decided to raise the federal funds rate by 25 basis points (0.25 percentage point) in order to bring down inflation – currently at 7.9%. This could provide further details of the central bank’s plan to reduce its holdings of Treasury securities and mortgage bonds.

While there is no proven correlation between the cryptocurrency market and inflation, recent market movements following the release of economic indicators suggest that at least some bitcoin traders react to traditional economic data.

Before the Fed announced that it would raise interest rates on March 16, bitcoin (BTC) was trading around $40,335. Following the announcement, the largest cryptocurrency by market cap has been on a steady increase, currently meandering around $45,900, according to data from Messari.

The Federal Reserve last reduced its balance sheet in 2018, after its assets quadrupled following the financial crisis in 2008. The minutes could reveal how high the Fed plans to set monthly caps for the amount of securities that mature in order to secure a smooth reduction.

Brainard, who currently awaits Senate confirmation to serve as the Fed’s vice chair, said that those caps would be much larger than during the reduction that followed the financial crisis.

“Given that the recovery has been considerably stronger and faster than in the previous cycle, I expect the balance sheet to shrink considerably more rapidly than in the previous recovery, with significantly larger caps and a much shorter period to phase in the maximum caps compared with 2017-19,” Brainard said.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Helene is a U.S. markets reporter at CoinDesk, covering the US economy, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

CoinDesk - Unknown

Helene is a U.S. markets reporter at CoinDesk, covering the US economy, the Fed, and bitcoin. She is a recent graduate of New York University's business and economic reporting program.

Trending

1
CoinDesk - Unknown
First Mover Asia: Bitcoin Rebounds Past $20K; China’s Blockchain Revolution Is Missing On-Chain Data

Ether and most other major altcoins regain ground they'd lost in last week's downturn; China companies seem unconvinced by blockchain technology.

CoinDesk - Unknown
2
CoinDesk - Unknown
NFT Platforms Should Be Caught by EU Money-Laundering Overhaul, Lawmakers Say

Unhosted wallets and decentralized finance were left largely unscathed by two landmark crypto laws agreed to last week, but left-wing lawmakers may seek another go as they discuss dirty-money rules.

CoinDesk - Unknown
3
CoinDesk - Unknown
Bitcoin se recupera y supera los $19K; Nomura advierte de una recesión en EE. UU. y Reino Unido

Nomura escribió acerca de una recesión en la eurozona, el Reino Unido y Asia Pacífico, lo que podría influir en los precios de las criptomonedas.

CoinDesk - Unknown
4
CoinDesk - Unknown
Argentinos se refugian en stablecoins durante el fin de semana tras dimisión del ministro de Economía

Los principales exchanges del país informaron que los usuarios compraron hasta tres veces más criptomonedas estables que durante un fin de semana normal, en medio una crisis económica en ciernes.

CoinDesk - Unknown