NEW YORK (Reuters] – Federal Reserve officials may move quicker and more quickly to reduce the bank’s $9 trillion debt than during tightening cycles in the past, however, there have not been any final decisions, Fed Chair Jerome Powell announced Tuesday.

Powell told a Senate confirmation hearing that “the economy is in an entirely different place than it was before we stopped asset purchases last time.” The time period between the end of purchases and the start of runoff will be much shorter. Also, the balance sheet is larger so that the runoff can occur faster.

Powell pointed out that policymakers still debate approaches and suggested it might take them two, three, or four meetings to reach such decisions.

STORY:

MARKET REACTION:

STOCKS: After a temporary loss, the initial extension was 0.47% greater

BONDS – The 10-year Treasury note yield was at 1.7675% as it was before the testimony. 2. Year note yield fell to 0.9187%.

DOLLAR – The original was slightly less to reflect a loss at 0.23%

COMMENTS:

LOU BRIEN, MARKET STRATEGIST, DRW TRADING, CHICAGO

“Today I thought that he was more moderate than the general tone of the minutes — and I think that’s why you’re seeing the dollar a little weaker and the stocks up near their highs — such as we could start unwinding the balance sheet later in 2022, which was certainly less than some of the more — in particular Bullard — some of the more hawkish comments that we’ve seen from the Fed. So, I thought that he moderated things a little bit and went along with the idea that there’s more discussions to be had. And that certainly nothing’s happening at the meeting in a few weeks from now, except for more discussions. So, I would say that if anything he moderated the sentiment that people took from the minutes.”

ART HOGAN, CHIEF MARKET STRATEGIST NATIONAL SECURITIES NEW YORK

“The reactions we are seeing today reflect things we already know.

“We are entering this commentary knowing that there will be three rate increases and the Fed may actually consider quantitative tightening.

All of this has been baked into over the past month. It is therefore less surprising and the market is heading in that direction.

KARL SCHAMOTTA is DIRECTOR OF GLOBAL MARKET STRATEGY AND GLOBAL PRODUCT, CAMBRIDGE GLOBAL PAYMENTS. TORONTO

“Powell defied the hawkish commentary of others on the Fed’s rate-setting committee, suggesting that a quantitative tightening decision will come in the next two to four meetings, with bonds allowed to roll off in an organic manner – as opposed to actively selling securities into the market. It is increasing global risk appetite, and promoting flows to yield-sensitive currencies such as the Canadian dollar.

“Of course, although Powell may be applying the defibrillator to the “reflation trade”, it’s still dead. The prospect of tighter money and more expensive policy will not go unnoticed by market participants in the months and weeks ahead.

PAUL TUDOR JONES CHIEF INVESTMENT OFFICER TUDOR INVESTMENT COMPANY, ON CNBC

“Clearly all the inflation trades of the pandemic are going to be challenged right now,” Jones said Tuesday on CNBC’s “Squawk Box.” “I think it’s going to be tough sledding for the inflation trades of the pandemic going forward… Things that performed the best since March 2020 are probably going to perform the worst as we go through this tightening cycle.”

“The real trick here would be, can the Fed unwind what many consider a financial bubble without there being huge negative economic consequences. We’ll watch and see.”