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Opinion
Robert Burgess

The Most Important Number of the Week Is $8 Trillion

The unprecedented amount of money on the Fed’s balance sheet may create a new “conundrum” for the U.S. central bank as it begins pulling back on stimulus.

Fed tapering is unlikely to produce much of a tantrum any time soon, with so much money sloshing around.

Fed tapering is unlikely to produce much of a tantrum any time soon, with so much money sloshing around.

Photographer: Samuel Corum/Bloomberg

Overlooked this week amid all the talk about the Federal Reserve starting the process of eventually paring back on its unprecedented stimulus efforts was the fact that the central bank’s balance sheet assets surpassed $8 trillion for the first time. This milestone should be a reminder that just because the Fed may soon start reducing, or “tapering,” the $120 billion a month it has been pumping into the financial system since the start of the pandemic, it doesn’t mean the forces that have underpinned markets are going away anytime soon — perhaps not for years.

The situation could set the central bank up for a repeat of former Fed Chairman Alan Greenspan’s “conundrum” when the central bank started tightening monetary policy in 2004 only to see long-term bond yields fall, contributing to easier financial conditions and spurring equities higher. We saw a hint of that last week, with the yield on the benchmark 10-year Treasury note dropping to some of its lowest levels since early March.