Janet Yellen’s Federal Reserve is getting ready to set off on a path toward a smaller balance sheet without knowing quite where it will end up. Policy makers have said they will probably start a multi-year drive to shrink the central bank’s $4.5 trillion balance sheet later in 2017. If instead the Fed returned to the technique it used prior to the crisis, the balance sheet could be much smaller. He contends that a smaller balance sheet would leave the Fed less vulnerable to political pressure to buy debt to help out the federal government. The Stanford economist suggested the balance sheet might end up at “somewhat more than $2 trillion” after normalization is complete.

Source: Mint June 13, 2017 07:30 UTC