How Fed Fights Next Downturn Hangs on Smooth Balance-Sheet Exit
- Fed officials see return to zero as likely in next recession
- QE in Fed toolkit risks political fracas over fiscal trespass
Fed's Evans Says 2% Inflation Goal 'Extremely Important'
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Federal Reserve officials intend to start the delicate task of drawing down their $4.5 trillion balance sheet as early as this year. Goal No. 1 will be to get the ball rolling without making a mess of markets in everything from U.S. mortgages to emerging-nation debt.
There’s something else at stake, however. The central bank’s very ability to use large-scale asset purchases -- otherwise known as quantitative easing, or QE -- to fight future recessions may hinge, in part, on how gracefully they pull back from their record level of holdings.