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Fed Plans for the End of Balance Sheet Runoff Later This Year

The Associated Press
JOHN CARNEY

Federal Reserve officials agreed at their meeting last month to press pause not just on interest rate hikes but also on the Fed’s reduction of its large bond portfolio.

“Almost all participants thought that it would be desirable to announce before too long a plan to stop reducing the Federal Reserve’s asset holdings later this year,” the minutes of the Fed’s January meeting said.

The Fed accumulated an unprecedented amount of bonds during its years-long Quantitative Easing program. Since then the Fed has been reducing its holdings by not reinvesting the proceeds it receives from bonds as they mature. In January, however, Fed officials said they wanted to stop allowing the portfolio to run down, which means the Fed would once again be buying bonds to replace those that mature.

At the conclusion of the January meeting, the Fed announced that it would not hike rates and would be patient about future hikes. It did not announce any change in the policy of reducing its bond holdings. Many Fed watchers anticipated the central bank might stop the runoff next year, so Wednesday’s minutes came as a surprise.

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