The Fed’s $6 Trillion Balance Sheet Is About Right: Bill Dudley

The US Federal Reserve will soon face a crucial decision: What to do with the vast portfolio of securities it has amassed in its efforts to manage the economy?

The best and safest approach would be to stop the shrinkage known as quantitative tightening very soon. That’s what I expect it to do.

After the 2008 financial crisis, and again during the global Covid pandemic, the Fed purchased large amounts of Treasury and agency mortgage-backed securities — a policy known as quantitative easing. This was to provide additional monetary stimulus at a time when short-term interest rates were already near ...