Economics
Fed’s $3.8 Trillion Balance Sheet Is Unlikely to Shrink More
- Current plan is to keep cutting the portfolio until September
- But shift to rate-cut stance makes that approach improbable
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The Federal Reserve is widely expected to reduce interest rates this month. That probably means its campaign to shrink its balance sheet is over, leaving the central bank with trillions of dollars more than before the 2008 financial crisis.
Beginning a decade ago in a bid to fight the calamity, the Fed by 2015 accumulated as much as $4.5 trillion of debt, including Treasuries and mortgage-backed securities. When policy makers began unwinding the portfolio at the end of 2017, primary dealers expected them to get it down to around $3 trillion or $3.5 trillion. But they’re not going to make it: Even after almost two years of cutbacks, the balance sheet is still brimming at $3.8 trillion.