Brian Chappatta, Columnist

Fed Shouldn’t Mess Around With Its Balance Sheet Wind-Down

Chairman Jerome Powell has been soothing enough to markets about the central bank’s path forward.

January 25, 2019 at 6:19 PM UTC

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.

Don’t give up, Mr. Chairman.
Photographer: Al Drago/Bloomberg

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If the Federal Reserve’s goal was to calm markets after a tumultuous end to 2018, it has largely succeeded. U.S. stocks have staged an impressive comeback from their lows, the high-yield bond market just had its busiest week since August, and even leveraged loans are rebounding. All it seemed to take was Chairman Jerome Powell and other officials saying that the central bank’s plans to reduce the size of its balance sheet wasn’t quite on autopilot after all.

Yet there’s some indication that policy makers want to take it a step further. The Wall Street Journal reported Friday that officials are considering a quicker end to the runoff, and that Powell might hint at a change in plans at a press conference following the Federal Open Market Committee’s meeting next week: