Source: Wall Street Journal

“Federal Reserve officials are close to deciding they will maintain a larger portfolio of Treasury securities than they’d expected when they began shrinking those holdings two years ago, putting an end to the central bank’s portfolio wind-down closer into sight….The Fed began gradually shrinking its mortgage and Treasurys portfolio in 2017 by allowing securities to mature without reinvesting the proceeds into other assets. At the time officials said the slow unwind would fade into the background – the equivalent of watching paint dry. Fed officials led markets to expect the process would take several years to play out. When the runoff began in October 2017, various officials estimated the portfolio – then around $4.5 trillion – could shrink to anywhere between $1.5 trillion and $3 trillion….Mr. Powell will hold a press conference after next week’s Fed meeting. Whether he provides such a road map will depend on the progress of discussions at the meeting. Mr. Powell said this month he doesn’t think the Fed’s portfolio changes are a major culprit in recent volatility but that the central bank would change its drawdown, if officials came to a different conclusion.”

 

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