While most of the market's attention has been on interest rates, the Federal Reserve is quietly getting ready to loosen policy in another respect as it prepares to slow down the shedding of assets on its balance sheet.
Tapering down the roll-off could see the Fed reducing the caps in half, according to a projection from BNP Paribas.
The QT program has resulted in a nearly $1.3 trillion reduction in total holdings, with the total balance sheet now standing at about $7.7 trillion.
With confidence growing that inflation is easing, policymakers are looking to loosen up policy, albeit at a measured pace.
So at this meeting, we did have some discussion of the balance sheet, and we're planning to begin in-depth discussions of balance sheet issues at our next meeting in March," Chair Jerome Powell said in his January post-meeting news conference .
Persons:
Krishna Guha, Goldman Sachs, We're, Jerome Powell, we're
Organizations:
Federal Reserve, Evercore ISI, Fed, MBS, New York Fed, BNP Paribas, BNP