Press Releases

Republicans Press Powell on Balance Sheet & Economic Outlook


Washington, February 27, 2019 -

WASHINGTON – Today, Federal Reserve Chairman Jerome Powell testified before the House Financial Services Committee at the semiannual hearing entitled: Monetary Policy and the State of the Economy.

Republican Leader of the House Financial Services Committee, Patrick McHenry (NC-10), began by highlighting the economy’s “remarkable growth” over the last two and a half years, and unemployment lows “that many once believed were impossible,” as a result of Republican tax and regulatory relief. Ranking Member McHenry went on to say that the Federal Reserve’s interest in “regulatory rightsizing,” through targeted rule-making, will help to continue these positive trends.

Watch the Ranking Member’s opening statement here or by clicking on the image below.

The Ranking Member, and several of his Republican colleagues, raised the issue of the Federal Reserve’s plan to normalize the balance sheet, which, McHenry pointed out, stands at roughly $4 trillion. Since the financial crisis, the Fed has used its balance sheet as a powerful tool, buying bonds to stabilize the economy, but the Fed recently has recognized the importance of normalizing the balance sheet and communicating its normalization strategy in clear language. A normalized balance sheet is the natural result of improvements in the economy since the crisis, and it will help the Fed’s reserve balances more accurately reflect banks’ demands for reserves, allowing for more transparent and accountable monetary policy.

The Ranking Member asked the Chairman to share what his “view of that normalization looks like” and elaborate on his previous reference to “the demand of reserves as a reference point for that.” The Chairman stated that the process of normalizing the balance sheet is “going back to where the size of the balance sheet is driven by demand for our liabilities, which has evolved.” The Chairman assured the Ranking Member the Fed would be releasing a plan “very soon” that would “light a path” toward normalization, and agreed to share this plan.

Watch the Ranking Member’s questioning of Chairman Powell here or by clicking on the image below.

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