Federal Open Market chief announced its decision on balance sheet reduction plan

Federal Reserve Chair Janet Yellen speaks in Washington, Wednesday, June 14, 2017, to announce the Federal Open Market Committee decision on interest rates following a two-day meeting. The Federal Reserve has raised its key interest rate for the third time in six months, providing its latest vote of confidence in a slow-growing but durable economy. (AP Photo/Susan Walsh)

Vastavam web: The Federal Reserve’s plan to pare down to its $4.5 trillion balance sheet from this month should go smoothly and not disrupt the Treasuries and mortgage-backed securities markets, the Federal Reserve’s top markets official said on Wednesday.“I am confident that the FOMC plan will reduce the size of the portfolio in a gradual and predictable, ‘no surprises’ manner,” the New York Federal Reserve’s markets chief Simon Potter said in a prepared speech at the The European Money and Finance Forum.

The Fed has laid out a predictable and gradual program to normalize its balance sheet, which Potter expects would mitigate the risk of volatile or big price reactions in Treasuries and MBS.“Now, confidence doesn’t mean certainty: there is always a risk that events could unfold differently from expectations,” Potter said.He cited the “taper tantrum” in the bond market in 2013 after then Fed Chairman Ben Bernanke hinted at the Fed’s slowing its bond purchases as something some traders worry might happen again when the Fed shrinks its balance sheet.