Plans by the U.S. Federal Reserve to pare back its balance sheet should not be seen as a surprise with a reshuffle at the central bank likely in 2018, Goldman Sachs' chief economist has told CNBC Thursday.
"I think it makes some sense. Personally I don't think it's really urgent for them to start reducing the balance sheet, but assuming that you want to do this at some point in the next year or two, I think it does make some sense to get started before the leadership transition at the Fed," Jan Hatzius said.
The minutes of the Fed's latest policy meeting Wednesday showed the central bank aims to reduce the $4.5 trillion in bonds on its balance sheet at some point this year.
"There will likely be a new Fed chair after early 2018, when Janet Yellen's term comes to an end and having already established a bit of a baseline path for how the balance sheet is going to be adjusted probably makes sense at that point to reduce the uncertainty that you otherwise get in that period," he added.
Reducing the balance sheet would have an impact on the markets given its sheer size. According to Janet Yellen, such a move would work as a rate hike.
'I'm not stepping down'
President Donald Trump claimed during his election campaign that he would like to replace Janet Yellen and criticized the policies of the Federal Reserve. The current chair has said that she will serve until the end of her mandate.
"I was confirmed by the Senate to a four-year term, which ends at the end of January of 2018, and it is fully my intention to serve out that term," she said last November. Even if Trump removes her from the chair, she can still stay on as a board member.