Economics
Debt-Limit Fight Risks Early End to Fed Quantitative Tightening
- Fed has penciled in shrinking its bond portfolio into 2024
- Economists see rising risk Fed will need to end its plan early
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The Federal Reserve’s quantitative-tightening program risks being propelled toward an early end as US politicians bicker in Washington over raising the national debt limit, according to some economists and bond-market participants.
By shrinking its bond portfolio by up to $95 billion a month, the central bank is draining liquidity from the US financial system — complementing its interest-rate hikes in the battle to control inflation. An early end to QT could therefore provide the US economy with some relief.