Fed considers earlier stop to sale of bond portfolio


Fed Officials Weigh Earlier-Than-Expected End to Bond Portfolio Runoff

By Nick Timiraos
The Wall Street Journal
Friday, January 25, 2019

Federal Reserve officials are close to deciding they will maintain a larger portfolio of Treasury securities than they'd expected when they began shrinking those holdings two years ago, putting an end to the central bank's portfolio wind-down closer into sight.

Officials are still resolving details of their strategy and how to communicate it to the public, according to their recent public comments and interviews. With interest rate increases on hold for now, planning for the bond portfolio could take center stage at a two-day policy meeting of the central bank's Federal Open Market Committee next week. ...

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Fed officials led markets to expect the process would take several years to play out. When the runoff began in October 2017, various officials estimated the portfolio -- then around $4.5 trillion -- could shrink to anywhere between $1.5 trillion and $3 trillion. New York Fed President John Williams said in April 2017, when he was the San Francisco Fed's president, that runoff could last five years.

"In about three or four years, we'll be down to a new normal," said Fed Chairman Jerome Powell at his Senate confirmation hearing in November 2017.

The latest discussions indicate the runoff could end much sooner. ...

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