Fed's Bullard: Fed has essentially achieved its dual mandate

James Bullard, President of the Federal Reserve Bank of St. Louis,  is crossing the wires, noting that the Fed has essentially achieved its dual mandate, adding that the policy rate remains relatively low over horizon 

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Fed should be allowing the balance sheet to normalise naturally 

Maintaining the Fed's current $4.4 trillion in securities and other assets as it begins to raise its policy rate, Bullard said, means the central bank is in effect pushing up short-term borrowing costs while its asset holdings pull down long-term rates.

That "twist" in the yield curve is something the Fed has not debated as a policy choice, Bullard said, and could be prevented by letting the balance sheet begin to shrink.

As it stands the Fed reinvests any Treasury or mortgage holdings that mature each month, maintaining its total stock of holdings. It has said that practice would continue until the process of raising interest rates to a more normal level was "well underway."

Ending balance sheet reinvestment may allow for a more natural adjustment of rates across the yield curve," Bullard said, and also give the Fed more room to react with new asset purchases in the event a new crisis develops.