Will the Fed's Shrinking Balance Sheet Continue to Roil Markets?

The market recently got some much-needed insight into how much the Federal Reserve plans to shrink its balance sheet, which has ballooned to nearly $9 trillion in assets. This was largely due to the Fed's massive bond-buying program, which started at the beginning of the pandemic to ease the hard-hit economy.

In its recently disclosed March meeting minutes, the Fed said it plans to reduce its balance sheet by roughly $95 billion of assets per month later this year. That has the potential to cut its balance sheet by more than $1.1 trillion per year. Will markets continue to struggle when this massive effort begins?

At the start of the pandemic, the Fed turned to quantitative easing (QE), which is the process of purchasing U.S. Treasury bills, mortgage-backed securities, and in some cases, other assets from the market. This has become a staple in its recession playbook.

Continue reading

Source Fool.com