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SAN FRANCISCO/NEW YORK (Reuters) – With the wind-down of the Federal Reserve’s massive bond buying under way, policymakers are beginning to discuss the next stage – when to allow the U.S. central bank’s swollen balance sheet to shrink.
If the Fed sticks to a plan laid out in June 2011, a decision to stop reinvesting bond proceeds would precede any increase in interest rates and mark the beginning of the Fed’s first tightening cycle since 2004-2006.
By Ann Saphir
(Reuters) – The Federal Reserve should start raising U.S. interest rates in the second half of next year, and should do so only gradually, keeping borrowing costs well below normal levels even into 2017, a top U.S. central banker said on Wednesday.
“Given the economic outlook, and given also my view that we need accommodative policy relative to historical norms, we need to have relatively low levels of interest rates for quite some time,” San Francisco Federal Reserve Bank President John Williams told Reuters. “My own view is it makes sense to start raising rates in the second half of 2015.”