Fed starts shrinking $8.9T balance sheet to combat sky-high inflation – By Megan Henney (FOX Business) / June 1, 2022
Fed on track to reduce balance sheet by $3T over next 3 years
The Federal Reserve is poised to start shrinking its $8.9 trillion balance sheet, deploying one of its lesser-known tools as it seeks to tame the hottest inflation in a generation.
In a plan outlined at the U.S. central bank’s May meeting, policymakers said they will begin winding down the balance sheet on June 1 at an initial combined monthly pace of $47.5 billion, a move that will further tighten credit for U.S. households. They will increase the runoff rate to $95 billion by September, putting the Fed on track to reduce its balance sheet by about $3 trillion over the next three years.
The Fed’s balance sheet, which consists mostly of bonds and other assets that it has purchased, nearly doubled in size during the pandemic as the Fed bought up mortgage-backed securities and other Treasurys in order to keep borrowing cheap.
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