Loading ...The Federal Reserve could have a surprise in store for investors this week, even if everyone already knows the central bank is raising interest rates.
Along with the quarter-point increase in the Fed’s benchmark short-term target, the policymaking Federal Open Market Committee is likely to announce another change that would signal an early exit from its history-making program to reduce the level of bonds being held on its balance sheet.
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The mechanics are a little complicated. Yet it suggests that what once appeared to be an operation to shrink the amount of bonds the Fed owns — that would have run well into the next decade — could be wrapped up next year, or early 2020 at the latest.
Instead of reducing the balance sheet from its peak of $4.5 trillion to $2.5 trillion or so as some Fed officials indicated, the impact could be far less — perhaps, some suggest, to $3.5 trillion or even a little more.