Trimming the balance sheet would be the Fed’s next step in normalizing monetary policy. Essentially, that means the Fed’s portfolio has become less influential as an anchor for long-term rates than in the past. The Fed’s $1.76 trillion mortgage-backed securities holdings account for about a quarter of that market, compared to the Fed’s 12 percent share of the Treasury market. Some analyst argue that shrinking the Treasury portfolio would be the least disruptive, given its diminished share of the overall market. "The economy should grow into the Fed’s Treasury portfolio within about a decade," the bank’s analysts wrote in a note on Friday.

Source: Viet Nam News February 01, 2017 10:41 UTC