Fed to Pause Rates and Ponder on Balance Sheet Reduction

Federal Reserve officials are nearing a decision on when to end the reduction of the bonds it is holding on its balance sheet, a key consideration for investors watching how far the central bank will go in tightening monetary policy, according to a Wall Street Journal report.

The Fed began the balance sheet roll off in October 2017 after it had reached more than $4.5 trillion. Wall Street has worried that the operation is adding to pressure in markets that had already built during a series of interest rate hikes that began in 2015.

Further consideration of when to end the roll off is likely to come up at next week’s Federal Open Market Committee meeting, according to the report. The policymaking body has been weighing the balance sheet reduction during its last several meetings, with officials noting in December that the central bank’s benchmark funds rate could become volatile as the operation proceeds.

“A lot of the heavy lifting has been done,” Kansas City Fed President Esther George told the Journal in a Jan. 15 interview. “We’re waiting for the committee to be satisfied that they have reached sufficient understanding of what all the moving pieces are.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza