The Federal Reserve should act predictably when addressing the size of its balance sheet in order to avoid surprises for investors that could lead to significant market moves, International Monetary Fund (IMF) Director Tobias Adrian told CNBC on Wednesday.
"The Federal Reserve has an additional policy tool which is the size of the balance sheet and it can use that policy tool to impact longer term yields. We feel that it should use that tool in a predictable manner so that it doesn't generate surprises in the market place," Adrian said.
Federal Reserve officials had said the shedding of $4.5 trillion in bonds the central bank is holding on its balance sheet will begin this year.
The revelation came from a summary of the Federal Open Market Committee meeting held in March, during which the group approved a quarter-point hike in its benchmark interest rate target. Officials at the meeting noted that the Fed is likely to raise rates at a faster pace.