(Reuters) – While the Federal Reserve should lower its balance sheet faster and earlier than usual during the tightening cycle of policy, San Francisco Federal Reserve Bank President Mary Daly indicated on Thursday that the Federal Reserve must do so gradually and should be predictable.

Daly spoke at a Bank of England conference, “We need to be careful that we don’t make any adjustments to our balance sheet for every meeting. Because we don’t know enough to make it an operating tool.” We need to remember that the balance sheet must be resilient to a sudden change in the funds rate or to a slower one – either a positive or negative shock to an economy.