Fed’s Balance-Sheet Dynamics Still Weigh Heavy Five Years On

As the Federal Reserve continues to unwind its balance sheet, it’s still dogged by the same issues that it faced more than five years ago.

While market dynamics have evolved, the main issue facing policymakers and investors is how to measure liquidity in the financial system and avoid turmoil that forced the Fed to intervene in September 2019, as the Fed runs down it holdings.

The central bank has reduced its assets by more than $2 trillion since the process known as quantitative tightening began in mid-2022. Now, a plurality of Wall Street strategists expect the Fed to end QT ...