Janet Yellen

Top Fed official tells AP: Bond portfolio could shrink soon

A top Federal Reserve official suggested Monday that the Fed will likely announce next month that it will begin paring its bond portfolio — a step that could lead to slightly higher rates on mortgages and other loans.

In an interview with The Associated Press, William Dudley, president of the Federal Reserve Bank of New York, said he thinks the Fed has adequately prepared investors for a reduction in the portfolio, which swelled after the 2008 financial crisis as the Fed bought bonds to reduce long-term rates. With the economy now much healthier, the Fed is ready to begin trimming its bond holdings.

Dudley also said that he would favor a third increase this year in the Fed's...

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