Federal Reserve Fire Sale $9 Trillion Over 3 Years

Plans for Reducing the Size of the Federal Reserve’s Balance Sheet – Federal Reserve

The U.S. Federal Reserve Bank plans to add to the fire-sale of securities taking place with extreme liquidations. Effects of balance-sheet reduction are ‘very uncertain,’ Chairman Powell says, which should concern all retirees, investors, savers, or even debtors with variable interest rate debts such as credit cards, student loans, and equity lines.

The Federal Reserve plans to shrink its $9 trillion balance sheet over the next three years and raise interest rates to fight inflation.

The Fed plans to reduce its holdings of Treasury bills, coupons, and mortgage bonds by $95 billion a month starting in September.

Fed Chairman Jerome Powell said higher rates are the cure to dulling the pain of a surge in the cost of living, but he also spoke to the potential for wide-ranging effects by shrinking the Fed’s balance sheet.

Stocks surged after Fed Chair Powell signaled support for two 50-basis-point rate hikes but ruled out a more significant 75-basis-point hike.

Read more on this at the following additional news sources:

  1. Plans for Reducing the Size of the Federal Reserve’s Balance Sheet  Federal Reserve
  2. The Federal Reserve Bank unveils plan for quantitative tightening : Planet Money : The Indicator from Planet Money  NPR
  3. Fed interest rate hikes loom  Axios
  4. Federal Reserve’s balance sheet to shrink by nearly $3 trillion: BofA Global  MarketWatch
  5. What the Fed’s ‘Quantitative Tightening’ Plans Mean  The Washington Post
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