The Federal Reserve is about to start shrinking its $8.9 trillion balance sheet, deploying a second tool alongside higher interest rates to curb inflation, though officials don’t know just how effective it will be.
After doubling in size through asset purchases in the first two years of the pandemic, the balance sheet will be reduced at a pace that’s almost twice as fast as after the last financial crisis. While the process officially commences on Wednesday, the first US Treasury securities won’t run off until $15 billion mature on June 15. The Fed is capping monthly runoff at $47.5 billion