Brian Chappatta, Columnist

If Fed’s ‘50 B’s’ Are Wrong Now, Then When Is Right?

President Trump implores policy makers to stop trimming its balance sheet, but the economy is strong enough to follow through on the plan.

December 18, 2018 at 4:37 PM UTC

By Brian Chappatta

Brian Chappatta is managing editor of Bloomberg News' leveraged finance and distressed debt teams. He was previously managing editor and team leader of its wealth group. Before that he was a Bloomberg Opinion markets and finance columnist and a bonds reporter for Bloomberg News.

Jerome Powell knows the score.
Photographer: Mark Kauzlarich/Bloomberg

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In between tweets about Michael Flynn’s court appearance and Twitter making it hard for him to accumulate followers, President Donald Trump on Tuesday made an eye-catching remark about monetary policy: “Stop with the 50 B’s,” he told the Federal Reserve.

For those who don’t understand the reference, Trump was referring to the Fed’s policy of trimming its balance sheet by up to $50 billion a month.1 To do so, policy makers let their current holdings of U.S. Treasuries and mortgage securities mature without reinvesting the proceeds. Since it began in earnest in October 2017, the central bank’s bond portfolio has dropped to about $4.1 trillion, from as much as $4.5 trillion four years ago. Before the financial crisis, it held less than $1 trillion.