- Balance sheet reductions will inform the appropriate pace of increases
- Its baseline suggests they won’t need to raise rates above neutral
- Haven’t set appropriate pace for balance sheet runoff, but expect scale symmetry from last
- Comfortable with more aggressive rate hikes if the data indicates it’s appropriate
The balance sheet issue is the short-term one, but I think the market will look at the debate above neutrality. The long end of the curve is terminal rate pricing and if we don’t get above around 2.25%, the economy will have plenty of life in the years to come.