The following are highlights from a Reuters interview with Philadelphia Federal Reserve Bank President Charles Plosser on Wednesday.
FED AS LENDER OF LAST RESORT IF DEFAULT OCCURS:
“Clearly if something were to happen and financial markets were to seize up, and there were liquidity problems or financial market disruptions, I think the Fed would feel like it had the responsibility to go in and keep markets functioning, as a lender of last resort.”
NEW YORK, July 20 (Reuters) – The Federal Reserve may have
to buy more Treasuries after it eventually shrinks its $2.6
trillion balance sheet, in what would be a technical move to
reduce interest rate risk, a senior Fed official said on
Brian Sack, head of the New York Fed’s Markets group, told
the Money Marketeers of NYU that the Federal Reserve’s balance
sheet carries interest rate risk equivalent to $1.5 trillion in
10-year Treasury notes. That is $1 trillion higher than normal
for the Fed portfolio, Sack added.