Yellen Says Fed Will Shrink Balance Sheet Slowly

The video discusses a strategic plan for managing reserves in the banking system by gradually reducing reinvestment in treasury and mortgage-backed securities. This involves setting caps on reinvestment, which will increase over time, leading to a predictable balance sheet runoff. The process aims to minimize disruption to financial markets. As the balance sheet shrinks, a rise in long-term interest rates is expected, affecting the yield curve. The federal funds rate will be adjusted to maintain maximum employment and price stability.

What primary tool will be used for adjusting the stance of monetary policy?

What are the two main goals of setting the federal funds rate?