Fed's Bullard Says Balance Sheet Normalization Is Next

The video discusses the current economic environment, highlighting tame inflation, slow growth, and stable labor markets. It explains the Fed's decision to maintain low interest rates and focus on balance sheet normalization. The speaker argues against preemptive rate hikes and emphasizes the need to end the reinvestment policy to allow the balance sheet to naturally decrease. The impact of the Fed's large balance sheet on the yield curve and interest rates is also examined, advocating for a more natural adjustment of the yield curve.

Why is there a concern about the downward pressure on the yield curve?

What approach is suggested for managing the balance sheet runoff?