"Fed megaphone": Powell defends Fed policy

According to Nick Timiraos, Fed Chairperson Jerome Powell's speech on the balance sheet did several things: 1) it provided a mark-to-market assessment of the current outlook for quantitative tightening in light of recent signs of strengthening in overnight lending rates; and 2) it countered recent criticism, such as from US Treasury Secretary Vincent and others, that the support measures during the epidemic - implemented at the time with broad support from Congress and the Trump administration in the early days - were absurd policy interventions. Powell admitted (as he has acknowledged before) that it would have seemed wiser to stop QE sooner, but given the Fed's rapid and sharp change of course in 2022, the move had no material macroeconomic impact. It also defended efforts by populist senators from both parties to try to strip the Federal Reserve of its ability to pay the interest rate on excess reserves (IOR), warning that withdrawing this policy tool could be even more damaging to markets.