An overlooked Fed policy comes into focus as central bankers weigh how to slow ‘QT’An overlooked Fed policy comes into focus as central bankers weigh how to slow ‘QT’
Central bank officials are expected this week to discuss a strategy for how to slow the shrinking of the Federal Reserve’s balance sheet, a lesser-known policy tool they have used to tighten financial conditions while fighting inflation.
Over the last two years, the Fed has shed roughly $1.5 trillion in Treasury and mortgage bonds that it accumulated while trying to stimulate the economy during the early parts of the pandemic, at a pace of roughly $100 billion every month.
Allowing those bonds to mature acts to push up long-term interest rates as more bonds have to be snapped up by…