Top Fed official tells AP: Bond portfolio could shrink soon

Aug 14, 2017 | 11:45 AM

NEW YORK — A top Federal Reserve official is suggesting that the Fed will likely announce next month that it will begin paring its bond portfolio — a step that could lead to slightly higher rates on mortgages and other loans.

In an interview with The Associated Press, New York Federal Reserve Bank President William Dudley says he thinks the Fed has adequately prepared investors for a reduction in the portfolio, which swelled after the 2008 financial crisis as the Fed bought bonds to reduce long-term rates. With the economy now much healthier, the Fed is ready to begin selling some of those bonds.

Dudley also says he would favour a third increase this year in the Fed’s benchmark rate if the economy remains strong. Many investors expect a rate hike in December.