The Federal Reserve's bond buying programs, although completed, are currently depressing 10-year Treasury yields by about 110 basis points, a top U.S. central banker said Friday. In a speech at a conference on monetary policy sponsored by the University of Chicago Booth School of Business, Fed Vice Chair Stanley Fischer said the estimate was based on a Fed staff study of the effect on the term premium on 10-year Treasury securities from the combination of all of the Fed's asset purchase programs. With the Fed's balance sheet near $4.5 trillion, the programs will continue to apply downward pressure on rates "for some time," Fischer said. The effects will likely wane over the next few years as the balance sheet begins to normalize, Fischer said. While the current high level of the balance sheet will present some challenges, the Fed is confident that it has the tools necessary to tighten monetary policy "at the appropriate time and at the appropriate pace," he said.
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