Fed’s Daly: wants gradual rate hikes, faster balance sheet reduction

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Jan 7 (Reuters) – San Francisco Federal Reserve Bank President Mary Daly on Friday said she supports gradual rate hikes this year and would like to start shrinking the central bank’s balance sheet faster than the last time the Fed did so.

“I would prefer to see us adjust the policy rate gradually and move into balance sheet reduction earlier than we did in the last cycle,” Daly said at the annual meeting of the American Economic Association, held virtually because of the pandemic. She said she would not prefer to start shrinking the balance sheet simultaneously with the first Fed rate hike, but could imagine adjusting the balance sheet after one or two rate hikes.

Reporting by Ann Saphir

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