Federal Reserve Chair Jerome Powell will take questions from the press this afternoon following the Fed’s policy meeting, at which officials are expected to signal a rate increase at their next meeting in March. But big questions remain about the pace of policy tightening, including how much and how often officials may raise rates this year, how soon they intend to start shrinking their nearly $9 trillion portfolio of assets and what that process will look like. We asked readers, and some other smart Fed-watchers, what they would ask Powell today — Ellen Meade, former senior economist at the Federal Reserve: “The FOMC has relied on the same process for tapering [asset purchases] as in 2014, although the timing has been more compressed this time around. Having an existing process is helpful in facilitating communications. “But to what extent has that reliable process slowed you down this time? You have tapered rather than stopped outright and you need to finish the taper before raising the funds rate. Meanwhile, inflation is running at 7 percent and many forecasters expect it to be at least that high over the next couple of months. “Is waiting until March to lift off risking the Fed's credibility? How has the process hampered your action?” Bill English, Yale finance professor and former director of the Fed’s monetary affairs division: “Last time you wanted to wait until you were well away from the zero bound before you began that” process of shrinking the balance sheet. “There was a desire to move gradually. Given that the balance sheet is bigger now and you seem to be on a rapid path to raising rates, how does that affect those decisions and where does that bring you?” Megan Greene, senior fellow at Harvard Kennedy School and chief economist at Kroll: “Where does the Fed think all the workers have gone this time around, and based on that, can they really be pulled in from the sidelines? … The answer to the question is pretty key in figuring out what’s happening with the labor market.” Michael Strain, director of economic policy studies, American Enterprise Institute: “Is the Fed worried about the impact of quantitative tightening on the budget deficit? The Fed has become a major player in the Treasury market, and if the Fed is reducing its balance sheet then Treasury will need to find new buyers for its debt. Is the Fed worried about the level of investor demand for Treasuries, and will that factor into its decisions?” Chris Whalen, chair at Whalen Global Advisors: Why do Fed officials think that they can shrink the portfolio without triggering another liquidity crisis? Lou Crandall, chief economist at Wrightson ICAP: “What role does the shape of the yield curve play in the Fed’s policy deliberations? Does the Fed view the slope of the yield curve mainly as a reflection of economic conditions, or as a variable that can be actively manipulated for policy purposes?” Jeff Hauser, executive director of the Revolving Door Project: “Does the Fed believe that Congress has a reasonable oversight role to play in light of recent ethics failures? If yes, will the Fed commit to complying with Hill requests for information concerning the recently resigned senior officials and the broader conflict of interest policies that were in, or not in, place during the pandemic?” IT’S WEDNESDAY — Happy Fed Day to all who celebrate. Tell us: How do you press conference? We do two Diet Cokes, CNBC muted on the TV, Fed feed on the laptop, cell phone recording audio, on the couch. Also, send us your Fed takeaways and any remaining Powell questions at kdavidson@politico.com, aweaver@politico.com or on Twitter @katedavidson and @aubreeeweaver.
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