Fed Officials See Smaller Balance Sheet in the Long Run

Federal Reserve officials pledged to reduce the size of the central bank’s record balance sheet as they continued to map out a strategy to exit from the most aggressive monetary stimulus in its 100-year history.

“In the long run, the balance sheet should be reduced to the smallest level consistent with efficient implementation of monetary policy and should consist primarily of Treasury securities” in order to minimize the effect of the Fed’s portfolio holdings on credit allocation across different sectors of the economy, according to the minutes of the Federal Open Market Committee’s July meeting released today.