Courtesy of Mish.
In addition to hiking today, the Fed announced its Plan to Shrink Asset Holdings Beginning This Year.
Balance sheet reduction hasn’t started yet, nor did the Fed even say when it would start. Since the Fed will announce the start date in advance, its eye would appear to be focused on December.
Once balance sheet reduction starts, the cap will be $10 billion a month rising to $50 billion a month, on a schedule not posted.
How to Build Up a Balance Sheet
The initial $10 billion cap on reductions is $6 billion in Treasury securities and $4 billion in mortgage bonds.
The maximum reduction rises to $50 billion a month, $30 billion a month for Treasurys and $20 billion a month for mortgage securities.
How Long Will It Take?
At $10 billion a month, $120 billion a year, it would take the Fed 29 years to reduce its balance sheet to $1.0 trillion from $4.5 trillion.
