FedÕ Bullard sees little risk in gradually selling mortgages

Federal Reserve Bank of St. Louis President James Bullard said the central bank, if it were to start selling mortgage securities later this year, could start the process with “little impact” on markets by using a “reverse taper” approach to slowly unwind its balance sheet. In an interview, Bullard said he continues to support asset sales in late 2010 — an idea he floated earlier this year — as long as the economy continues recovering. Just as the Fed used the “taper” approach to slow its purchases of mortgage securities, extending them into March, he said the Fed could avoid market disruptions by using a similar strategy for its eventual exit. But Bullard, a voting member of the Federal Open Market Committee, said policymakers are in “ongoing discussions” about whether to take that approach and haven’t made a decision about asset sales.

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