$ 9 trillion. so even with a hefty reduction in holdings over the next year, we will still have a balance sheet that will be more than sufficiently large enough to conduct monetary policy. second, the fed ’ s overnight reverse repurchase agreement facility, put in place to help conduct monetary policy, receives a large amount of deposits each day. the daily average take - up of $ 1. 6 trillion so far in 2022 tells me that there is tremendous excess liquidity in financial markets. large redemption caps will assist in removing this excess liquidity. third, we have learned a lot about operating in an ample reserves regime over the past decade. and we learned lessons from the 2019 experience in reducing reserves. in the first quarter of 2019 the ratio of reserves to nominal gross domestic product ( gdp ) was approximately 8 percent and financial markets worked well and banks were flush with liquidity. right now, reserves are far more than ample, standing at 17 percent of gdp. when evidence suggests that we are getting closer to a more appropriate and sustainable level of reserves, we can slow the pace of redemptions. finally, we have the newly established standing repurchase facility, which acts as a backstop to buffer any unexpected liquidity needs. this facility can help assist us with any unexpected bumps along the way. with large caps and sizable amounts of securities maturing over the course of the next year or two, i do not see the need to consider asset sales anytime soon. however, because the fed ’ s mortgage - backed securities ( mbs ) holdings have long maturities and are quite sizable, prepayments are unlikely to bring these holdings down to de minimis levels over the next decade. so, mbs sales could be something the committee considers down the road to satisfy our balance sheet principles long run goal of holding primarily treasury securities. but that is a conversation for another day. in the meantime, i would support having no caps on mbs redemptions so our mbs holdings decline as fast as prepayments allow, which would modestly assist in moving us toward an all - treasury portfolio. thinking about possible monetary policy actions in 2022, i expect it will be a very fluid year. the chair has said we will be nimble. i believe nimble describes how we acted in 2021 as well, when nimbleness and good communications served the fomc well. think back to the middle of 2021. just last june, markets expected tapering to begin sometime

christopher j waller : fighting inflation with rate hikes and balance sheet reduction speech by mr christopher j waller, member of the board of governors of the federal reserve system, at the economic forecast project, university of california, santa barbara, california, 24 february 2022. * * * thank you peter, and thank you to the ucsb economic forecast project for the invitation to speak today. my plan is to start with my outlook for the u. s. economy in 2022, and then describe what i consider the appropriate path of monetary policy to keep the economy on a healthy and sustainable course. 1 but, before i get into that discussion, let me comment on what i think is on everyone ’ s minds today, russia ’ s attack on ukraine. obviously, there are people in harm ’ s way and we shouldn ’ t lose sight of them. it is far too early to judge how this conflict will affect the world, or the world economy, and what the implications will be for the u. s. economy. but this situation adds uncertainty to my outlook and will be something i will be monitoring very closely. as my speech will say, we will need to carefully look at the incoming data, especially during a time of heightened uncertainty. turning to my outlook for the economy, my greatest concern is continued elevated inflation. inflation is too high, and i think concerted action is needed to rein it in. the federal open market committee ( fomc ) has multiple tools to tighten monetary policy, and i will go into some detail about how i believe the fed should approach increasing the target range for the federal funds rate and reducing the size of the balance sheet. but let me start with the outlook for economic activity. i expect the economy to continue expanding at a healthy rate this year, slower than in 2021 but still at a solid pace that will keep employment growing strongly. while there are some signs that the effects of the omicron variant have dampened economic growth in the last month or two, it does not appear to have affected hiring, given the healthy jobs report for january. even covid - sensitive sectors such as leisure and hospitality saw big job gains last month. with covid cases dropping sharply, i expect this latest surge in infections will not be a major factor affecting the economy in 2022. supply bottlenecks and labor shortages, some of them related to the pandemic, continue to weigh on economic output, but i expect those to diminish later this year