brian p sack : managing the federal reserve ’ s balance sheet remarks by mr brian p sack, executive vice president of the markets group of the federal reserve bank of new york, at the 2010 chartered financial analyst ( cfa ) institute fixed income management conference, newport beach, california, 4 october 2010. * * * it is a pleasure to be here today to discuss the management of the federal reserve ’ s balance sheet. the federal reserve currently holds more than $ 2 trillion of securities in its portfolio, making it a key participant in u. s. fixed - income markets. moreover, the portfolio is managed in a manner that differs from any other market participant, as the federal open market committee ( fomc ) has adjusted the size and composition of the portfolio with the intention of achieving its monetary policy objectives of full employment and price stability. thus, it is important for market participants to understand the balance sheet decisions of the fomc and the implementation of those decisions to fully assess the implications for fixedincome markets. the evolution of the balance sheet going forward will depend on how the economic outlook unfolds. the current forecasts of fomc members show the economy moving in the right direction, with a sustained recovery in gdp, a gradual reduction in the unemployment rate over time, and an increase in inflation towards the level that fomc members see as desirable over the intermediate term. however, the anticipated recovery is relatively tepid and thus delivers only slow progress toward meeting the federal reserve ’ s dual mandate. indeed, according to their most recently published forecasts, most fomc members expect the unemployment rate to remain above 8. 25 percent through 2011 and the inflation rate to remain below its mandate - consistent level through 2012. in addition, the economy remains vulnerable to downside surprises that could take both output and inflation further away from the fomc ’ s objectives. the sluggish outlook for the economy and the risks that surround that outlook have raised the possibility of further monetary policy accommodation. the most recent fomc statement indicated that the committee “ is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate. ” the fomc has several policy tools that it could use to achieve more accommodative financial conditions, as chairman bernanke discussed in his speech at the jackson hole symposium in august. my remarks today will focus on one of those options – changing the size of the federal

for the u. s. economy is reasonably good, there is considerable work to do over the longer term to improve our nation ’ s productive capacity and foster an environment in which the gains are spread more evenly. monetary policy is limited in what it can do to address these broader structural issues. however, monetary policy will do its part to ensure the macroeconomic and financial stability that can help in achieving progress in these areas. moreover, even with respect to macroeconomic stability, monetary policy could use an assist from fiscal policy. it is important that monetary policy and fiscal policy work together and not at cross purposes to be able to bolster the economy when it needs support. thank you for your kind attention. i would be happy to take a few questions. 1 see new york city ’ s return from the brink, remarks at the lotos club, october 19, 2016. 2 raj chetty, nathaniel hendren, patrick kline and emmanuel saez. “ where is the land of opportunity? the geography of intergenerational mobility in the united states. ” quarterly journal of economics, vol. 129, no. 4, 2014. 6 / 6 bis central bankers'speeches