Brian Sack, executive vice president at the Federal Reserve Bank of New York, said that as the central bank starts tightening monetary policy, it needs to shrink its balance sheet gradually. "A decision to shrink the balance sheet more aggressively could be disruptive to market functioning," Mr. Sack said. "A more aggressive approach would risk an immediate and substantial rise in longer-term yields that, at this time, would be counterproductive for achieving the [Federal Open Market Committee's] objectives."

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