2.8.22 What is Balance Sheet Runoff and Should Investors Be Concerned?
Since the beginning of the COVID-19 pandemic, the Federal Reserve (Fed) has been supporting financial markets by buying $120 billion of U.S. Treasury and mortgage-backed securities (MBS) each month. Currently, the Fed is in the process of reducing (tapering) the amount of asset purchases but is still adding to its balance sheet. However, meeting minutes from the December 2021 Fed policy meeting indicated that the Fed may begin to reduce the size of its balance sheet in 2022. Balance sheet runoff, or quantitative tightening (QT) as it’s also called, is how the Fed plans to reduce the size of its balance sheet. Currently, as bonds mature,
... Read more