Fed May Maintain Asset Balance After Exiting QE

Federal Reserve Chairman Ben S. Bernanke said the central bank may decide to hold bonds on its $3.1 trillion balance sheet to maturity as part of a review of its strategy for an exit from record monetary easing.

Bernanke told lawmakers in Washington today that he expects to revisit “sometime soon” an exit plan that policy makers outlined in June 2011.

Under that plan, the Fed would cease reinvesting some or all principal payments from its securities, revise its interest- rate outlook, raise the federal funds rate and then start selling housing debt to eliminate it from the central bank’s portfolio in three to five years.

“The one thing we could do differently” is “hold some of the securities a little longer,” Bernanke said in response to questions from members of the House Financial Services Committee. “We could even let them just run off.”

Bernanke is the third policy maker in the last week to voice support for altering the central bank’s exit strategy to delay or eliminate asset sales. Governor Jerome Powell said Feb. 22 that the Fed could refrain from sales to avoid causing market disruptions and having the Fed take losses on the securities as interest rates rise.

Bloomberg

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