In the second day of Congressional Testimony, Fed Chair Jerome Powell said Fed will stop the balance sheet runoff this year. The balance sheet will then be at around 16-17% of GDP, up from 6% before the financial crisis. Considering that the US GDP is currently at around USD 20T, the balance sheet would eventually be between USD 3.2T and USD 3.4T. The Balance sheet is currently just over USD 4T.
Powell said “we’ve worked out, I think, the framework of a plan that we hope to be able to announce soon that will light the way all the way to the end of balance sheet normalization”. And, “we going to be in a position … to stop runoff later this year.”
He also bluntly noted that Fed is “not looking at a higher inflation target, full stop”, even if Fed is rethinking its policy framework for this year.
