Williams: The Fed may soon need to bolster its balance sheet by buying bonds

John Williams, president of the Federal Reserve Bank of New York, stated that the central bank may soon need to expand its balance sheet through bond purchases, following its decision last week to halt the reduction of its bond holdings.

In prepared remarks for the European Central Bank's conference on financial markets in Frankfurt, Williams added, "The next step in our balance sheet strategy is to assess when reserves reach an adequate level."

He explained, as reported by Reuters, that when that occurs, it will be an appropriate time to begin a gradual process of asset purchases.

These comments come after the Federal Reserve announced at its meeting last week the end of a three-year process of reducing its bond holdings.