The Fed wants to start shrinking its $4.5 trillion balance sheet later this year

Most members of the Federal Open Market Committee believe it should start shrinking the Federal Reserve’s $4.5 trillion balance sheet later this year, according to minutes from their mid-March meeting.

The Fed amassed assets by buying Treasurys and other mortgage-related securities during the financial crisis to keep interest rates low.

Combined with increasing the fed funds rate, reducing the balance sheet would contribute towards normalizing monetary policy.

“The fact that we’re all hanging on to every utterance by the Fed is just an indication that they are also trying to get back to a place of normalcy after seven to eight years of emergency policy,” said Karissa McDonough, the chief fixed income strategist at People’s United Wealth Management.

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