From Bloomberg today:  emphasis mine…

“Federal Reserve Bank of Cleveland President Loretta Mester said the central bank should shrink its balance sheet as fast as it can without disrupting financial markets and repeated her backing to a March interest-rate increase.

“The case is very compelling that we remove accommodation,” Mester, who votes on the rate-setting Federal Open Market Committee this year, said during a Wall Street Journal Live event streamed on Twitter Wednesday.”

““The economy’s in a much stronger place than it was when we started doing the reductions last time.” said Mester, answering a question on how quickly she favored shrinking the balance sheet. “Frankly I would like to reduce it as fast as we can conditional on it not being disruptive to the functioning of the
financial markets.””

Well, it would sure be nice if they could have it both ways! I.e., quell inflation that they are in no small part responsible for creating, while doing so without piercing financial market bubbles that they are in huge part responsible for creating. 

Now, to be fair, she did say “the functioning of” financial markets. One might stretch and construe that as her referring to, say, the fluidity of the credit markets.

Well… on second thought… No! 

Should markets crack as the Fed tightens, we’ll no-doubt see them pivot back to an uber-dovish stance. Question being, simply, how wide will the crack have to get before they step back in? The tougher question being, will indeed they be able to catch what could be a rapidly falling knife (as they did in 2020) the next go-round?