What the Fed Minutes Could Reveal About the Balance Sheet

When it comes to the Federal Reserve's balance sheet, markets have more questions than answers — but that could change in coming months, starting Wednesday with the release of minutes of the central bank's March meeting.

The Fed kicked off serious discussion of its plan for unwinding its $4.5 trillion balance sheet at that March 14-15 gathering, officials have said, and this will be the first proper description investors receive of the conversation that took place behind closed doors. Even before those details go live at 2 p.m. in Washington, some on the policy-setting Federal Open Market Committee have already provided an outline of the debate via their post-meeting commentary.

"They are laying the groundwork and giving the market ample time to digest the different scenarios the Fed would do," said Sean Simko, who manages $8 billion in fixed-income assets at SEI Investments Co. in Oaks, Pennsylvania.

Below is a cheat sheet detailing key balance sheet-related topics, what policy makers have already said about them, and what the minutes could flesh out.

When the FOMC does decide to begin shrinking its balance sheet, it may also take a breather from interest-rate increases, New York Fed President William Dudley said in a March 31 Bloomberg Television interview.