US Federal Reserve Shifts Focus to the Balance Sheet

Oct 11, 2017 | Shawn Eliovitz


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In what marks the next leg of unwinding the extraordinary stimulus implemented during the financial crisis, the U.S. Federal Reserve (Fed) has announced plans to begin reducing the size of its balance sheet, by allowing bonds to mature .

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In what marks the next leg of unwinding the extraordinary stimulus implemented during the financial crisis, the U.S. Federal Reserve (Fed) has announced plans to begin reducing the size of its balance sheet, by allowing bonds to mature at a pace of US$10 billion per month, and then gradually increasing to a pace of US$50 billion each month. This gradual tightening of the money supply is expected the same impact as hiking rates one or two times per year. In the following article Eric Lascelles, Chief Economist of RBC Global Asset Management, and Krystyne Manzer, also of RBC discuss the Fed’s role, details on how and why the balance sheet grew to its current size, exactly how the Fed plans to reduce it, and the impact this may have on the broader economy:

 

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