this point some way down the line because we been “At it’s haven’t making that great a progress he said. I would hope that lately,” “But would mitigate some of President concerns if we could get that Hoenig’s idea to take hold among the Committee members that the way that’s we’d shrink the balance sheet.” the balance sheet down as the economy “We’d progressively manage improves just the way that we manage the balance sheet up in order to ease financial he added. conditions,” Bullard acknowledged that shrinking the balance sheet is long “a way in the future. But as far as style, as far as the way we would be able to manage the exit, I would hope that we could manage it down as opposed to having a passive policy of just allowing the run off to occur and not replacing it.” Addressing the belief in some quarters that the Fed is accommodating heavy Treasury borrowing to finance deficit spending or the Bullard said he is the need “monetizing debt,” “very cognizant of” to avoid even the perception that it is not an independent central bank. at the pace buying we are a big player in “Of course we’re absorbing the new issues of the he said. I am pretty Treasury,” “So concerned about this issue.” However, he think that has to be weighed against the fact added, “I that without doing anything there is a drift toward further disinflation and, you know, how long do you want that to go on before you get into a Japanese style situation.” Bullard said he (QE2) decision as a bit preemptive on sees “this that. The inflation numbers are low, but not so low that action they’re
“At this point it’s some way down the line because we haven’t been making that great a progress lately,” he said. “But I would hope that would mitigate some of President Hoenig’s concerns if we could get that idea to take hold among the Committee members that that’s the way we’d shrink the balance sheet.” “We’d progressively manage the balance sheet down as the economy improves just the way that we manage the balance sheet up in order to ease financial conditions,” he added. Bullard acknowledged that shrinking the balance sheet is “a long way in the future. But as far as style, as far as the way we would be able to manage the exit, I would hope that we could manage it down as opposed to having a passive policy of just allowing the run off to occur and not replacing it.” Addressing the belief in some quarters that the Fed is accommodating heavy Treasury borrowing to finance deficit spending or “monetizing the debt,” Bullard said he is “very cognizant of” the need to avoid even the perception that it is not an independent central bank. “Of course at the pace we’re buying we are a big player in absorbing the new issues of the Treasury,” he said. “So I am pretty concerned about this issue.” However, he added, “I think that has to be weighed against the fact that without doing anything there is a drift toward further disinflation and, you know, how long do you want that to go on before you get into a Japanese style situation.” Bullard said he sees “this (QE2) decision as a bit preemptive on that. The inflation numbers are low, but they’re not so low that action
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