Economics
With Liftoff Done, the Fed Revisits a $4.5 Trillion Quandary
- Fischer wants to use balance sheet to lean on long-term rates
- Market turmoil may push back rate rises, balance-sheet plans
Stanley Fischer, vice chairman of the U.S. Federal Reserve.
Photographer: Andrew Harrer/BloombergThis article is for subscribers only.
Federal Reserve officials who spent months debating their first interest-rate increase in almost a decade are turning next to the thorny question of what to do with a balance sheet equivalent to the size of Japan’s economy.
A month after liftoff, turmoil in global financial markets has pushed out expectations for more rate hikes and raised concern about what tools are available to fight the next downturn. Vice Chairman Stanley Fischerhas suggested the $4.5 trillion balance sheet could be maintained as a way to hold down longer-term Treasury yields while the short-term policy rate was lifted.