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The Editors

The Fed's New Normal

The central bank needs to tell investors what it’s thinking about its balance sheet.
Janet Yellen has some explaining to do.

Janet Yellen has some explaining to do.

Photographer: Andrew Harrer/Bloomberg

The Federal Reserve has prepared investors for a small increase in interest rates this week, part of its effort to get monetary policy back to normal. The central bank should deliver the quarter-point rise the markets expect -- but that isn’t all it ought to do.

Investors’ attention is turning to a new question: What does the Fed intend to do about its balance sheet? The Fed needs to say more about when and how its holdings, which exploded under its program of quantitative easing, will be unwound.