Fed could shrink balance sheet to end “twist” on yield curve – Bullard

James Bullard: it may soon be time to shrink the balance sheet

The US Federal Reserve's policy risks distorting the yield curve and allowing some shrinkage of the balance sheet could create a more natural process of normalisation, James Bullard said on February 28.

The Federal Reserve Bank of St Louis president said the Fed was enacting a sort of "twist operation" on the yield curve with no obvious "theoretical basis". By maintaining a $4.5 trillion balance sheet, it was keeping downward pressure on the long end of the curve, while raising rates at the

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