Federal Reserve Vice Chairman Janet Yellen said the Federal Open Market Committee won’t begin to shrink the Fed’s record balance sheet until after it starts raising the benchmark interest rate.
“The committee has made very clear that it intends to hold on its balance sheet all the assets we acquire in this purchase program until after we begin raising the federal funds rate,” Yellen said today in Washington. “The committee’s intention is to leave that accommodation in place until well into the recovery.”
Yellen, the Fed’s No. 2 official, affirmed the sequence of steps in the central bank’s strategy to normalize its policy, which was adopted in June 2011.
She also reiterated the Fed’s commitment not to raise its target rate if inflation is “well-behaved” and unemployment still above 6.5 percent, and said “we would not consider selling assets off until after the federal funds rate has increased.”
Yellen spoke to the National Association for Business Economics annual policy conference.