Why the Federal Reserve's Shrinking Balance Sheet Matters
The reduction will have significant implications for the economy and financial markets. Here are some key issues to watch.
No more liquidity for you.
Photographer: Samuel Corum/Getty Images
The release on Wednesday of the minutes of the Federal Reserve’s March 15-16 policy meeting is generating a lot of discussion about the central bank’s plans to reduce its bloated $9 trillion balance sheet. There will obviously be implications for the economy and financial markets, but what precisely those will be cannot be determined with sufficient confidence yet. Inevitably, it will take time. Accordingly, here are some key issues worth thinking about in the weeks ahead:
There is a simple yet insightful way to think about why and how the reduction in the Fed’s balance sheet matters.