Washington, Jan 12 : US Federal Reserve Chair, Jerome Powell has said that the central bank could start to shrink its balance sheet later this year. "We're going to end our asset purchases in March, meaning we'll be raising rates over the course of the year," Powell said on Tuesday at his confirmation hearing before the Senate Banking Committee. "At some point, perhaps later this year, we will start to allow the balance sheet to run off, and that's just the road to normalising policy," he said, adding the US economy "no longer needs or wants" the Fed's very highly accommodative policies. "The economy is in a completely different place than it was when we ended asset purchases the last time, so the period of time between stopping purchases and beginning runoff will be shorter, and also the balance sheet is much bigger so the runoff can be faster," he said. Esther George, President of the Federal Reserve Bank of Kansas City, also believed that it will be appropriate to move earlier on the balance sheet relative to the last tightening cycle, Xinhua news agency reported. "An approach of raising rates while maintaining an outsized balance sheet could flatten the yield curve and distort incentives for private sector intermediation, especially for community banks or risk greater economic and financial fragility by prompting reach-for-yield behaviour from long-duration investors," George said on Monday. The Fed began in November 2021 to reduce its monthly asset purchase program of $120 billion by $15 billion. In December, the central bank laid out a plan to reduce its monthly asset purchases by $30 billion starting in January, doubling the pace it announced in December 2021, in response to rising inflation pressures. That plan put the central bank on track to end asset purchases by March 2022, three months earlier than initially planned, as it exits from the ultra-loose monetary policy enacted at the start of the pandemic. As of last week, the size of the Fed's balance sheet has increased to over $8.7 trillion, more than double the amount compared with early 2020, according to the central bank. US President Joe Biden announced in November 2021 that he intends to nominate Powell for a second term as Fed Chair and to nominate Fed Governor Lael Brainard as Vice Chair. Biden is also expected to soon nominate three new governors to fill remaining vacancies on the seven-member Fed board, according to local media. /IANS