The long-awaited reduction in the Fed’s $4.5-trillion balance sheet, to begin next month, comes amid a cloudy short-term economic outlook and great uncertainty at the central bank. As expected, central bank officials voted to hold the benchmark federal funds rate steady at between 1% and 1.25%. Fed officials have been signaling for months that they planned to start reducing the Treasury bonds and mortgage-backed securities the central bank began buying in 2008. Although economists have varying views about the effect of those purchases, Yellen said they were successful in stimulating the recovery. “Financial markets will have to get more and more used to the sucking sound of disappearing central bank liquidity over the next few years,” Coulton said.

Source: Los Angeles Times September 20, 2017 18:03 UTC