The head of the Federal Reserve Bank of Kansas said the U.S. Federal Reserve should continue raising interest rates and start selling off its $4.5 trillion stockpile of cash and bonds as the economy improves.
“The economy looks to be on solid footing and there is a sense that outcomes could actually be better than expected, rather than worse,” Esther George said Tuesday, according to the Wall Street Journal. She added that “resisting the temptation to react to near-term fluctuations in the data will be necessary.”
George is not at the moment a member of the rotating Federal Open Market Committee, which votes on the Fed’s interest rate policies. But as one of the country’s top monetary officials, her word still carries weight.
She also urged the central bank to start selling off the bonds and cash reserves it built up after 2008 in a bid to stabilize financial markets and support the economy with cheap cash. “I would support beginning the process of reducing the balance sheet this year,” she said. “The process should be on autopilot and not necessarily vary with moderate movements in the economic data.”
The Fed raised rates in March and indicated more rate hikes may be in store. The prospect of rising interest rates matters to the real estate industry because it could push up the cost of debt. [WSJ] — Konrad Putzier