The US Federal Reserve could begin winding down its massive balance sheet sometime later this year in a shift that would make it less necessary to raise the official funds rate, a central banker said yesterday.
Talking to reporters in Australia, St Louis Federal Reserve President James Bullard said opinions differed within the Fed on ending its balance sheet reinvestment policy and it would take some time to agree on, but he felt it could start later in the year.
Bullard emphasized that the central bank would not be actively selling assets from its US$4.5 trillion balance sheet, but rather not replacing them as they mature.
This could be well accommodated by the market, he said, and would put limited upward pressure on US Treasury yields.
Markets were wrong-footed somewhat last week when minutes of the Fed’s last policy meeting showed policymakers were considering shrinking its assets later this year.
New York Fed President William Dudley said on Friday last week that the Fed could begin shedding bonds from its portfolio as soon as this year. The comments temporarily pushed the US dollar lower and raised yields on longer-dated bonds.
Economists polled by Reuters and by the Fed itself had generally expected the process to start some time next year.
Bullard, considered a policy dove by investors, said he favored only one more interest rate increase this year and argued that ending bond reinvestment could act as a replacement for rate rises.
Financial markets are pricing in about two more interest rate increases this year, while some at the Fed favor three or more.
Bullard said last month’s payrolls report published on Friday last week was relatively weak and fitted with his view that inflation would not stray far from 2 percent in the coming months.
Asked about the impact of the missile strike on Syria ordered by US President Donald Trump last week, Bullard said he did not see it as a major geopolitical event that would affect monetary policy at the Fed.
INVESTOR RESILIENCE? An analyst said that despite near-term pressures, foreign investors tend to view NT dollar strength as a positive signal for valuation multiples Morgan Stanley has flagged a potential 10 percent revenue decline for Taiwan’s tech hardware sector this year, as a sharp appreciation of the New Taiwan dollar begins to dent the earnings power of major exporters. In what appears to be the first such warning from a major foreign brokerage, the US investment bank said the currency’s strength — fueled by foreign capital inflows and expectations of US interest rate cuts — is compressing profit margins for manufacturers with heavy exposure to US dollar-denominated revenues. The local currency has surged about 10 percent against the greenback over the past quarter and yesterday breached
MARKET FACTORS: Navitas Semiconductor Inc said that Powerchip is to take over from TSMC as its supplier of high-voltage gallium nitride chips Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday in a statement said that it would phase out its compound semiconductor gallium nitride (GaN) business over the next two years, citing market dynamics. The decision would not affect its financial targets announced previously, the world’s biggest contract chipmaker said. “We are working closely with our customers to ensure a smooth transition and remain committed to meeting their needs during this period,” it said. “Our focus continues to be on delivering sustained value to our partners and the market.” TSMC’s latest move came unexpectedly, as the chipmaker had said in its annual report that it has
Rick Cassidy, the chairman of Taiwan Semiconductor Manufacturing Co's (TSMC, 台積電) US subsidiary, TSMC Arizona Corp, plans to retire, but the company has yet to name a successor. After Cassidy made his intention to retire known, TSMC Arizona held a special general meeting and approved a resolution that Cassidy would not continue as chairman and would not remain as a director, TSMC said in a statement filed with the Taiwan Stock Exchange last night. The meeting also approved a plan to appoint TSMC Arizona president Rose Castanares as a director, the company said, adding that Cassidy has been named as an advisor
SECURITY WARNING: The company possesses key 3-nanometer technology, and Taiwan should prevent it from being transferred to China, a lawmaker said The Ministry of Economic Affairs yesterday said it would conduct a “strict review” of any proposed acquisition of Taiwanese tech company Source Photonics Co (索爾思光電), following media reports that a Chinese firm was planning to buy the company in the Hsinchu Science Park (新竹科學園區). Local media reported that Suzhou Dongshan Precision Manufacturing Co (東山精密), China’s largest printed circuit board manufacturer, had announced plans to acquire Source Photonics for 5.9 billion yuan (US$823.1 million). The ministry said it has not received an application from Source Photonics and has formally notified the company that any buyout would constitute a change in its ownership structure. The