Fed Chairman Powell opened his testimony with a question on normalization
Fed Chairman Powell opened his testimony with a question on normalization, specifically on the role of IOER. IOER is currently the principle policy tool to keep rates in the designated area. Powell said there's been no decision on whether the Fed would move back to the prior methodology, and remains an open question in the long run. On the balance sheet normalization, the Fed chair agreed the portfolio is expected to be brought down to about $2 tln, but should be no larger than need be. On the composition of the balance sheet, it is expected to consist mainly of Treasuries over the long run, with MBS running off over time. The public should expect a consistent roll-off, but there's no specific pace, as there is for Treasuries, as maturing MBS is less predictable.