Fed's Harker sees more room to shrink Fed bond holdings

By Michael S. Derby

NEW YORK, Feb 17 (Reuters) - Federal Reserve Bank of Philadelphia President Patrick Harker said Monday the conditions that would allow the central bank to stop its balance sheet wind down do not appear to have arrived yet.

“We don’t exactly know” when the ongoing shrinkage of the balance sheet needs to stop but it does not appear that money market liquidity has grown tight enough for that to happen yet, Harker said in an appearance before a group in the Bahamas. The official said the Fed is closely watching markets for signs of tightness and he expects with reverse repo usage having fallen so much, bank reserves should start contracting more rapidly soon.