Summary of How Does the Fed Adjust Its Securities Holdings and Who Is Affected?

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How Does the Fed Adjust Its Securities Holdings and Who Is Affected? summary
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The US Federal Reserve is taking substantive measures to normalize its monetary policy in a retreat from its highly accommodative response to the 2007–2009 Great Recession. This change of direction requires the Fed to take a series of steps, including shrinking its more than $4 trillion balance sheet. Central bankers Jane Ihrig, Larry Mize and Gretchen C. Weinbach explain how the Fed will reduce its assets. getAbstract suggests this illuminating but highly technical report to finance professionals, accountants and investors intrigued by the complex machinations of Fed policy.

In this summary, you will learn

  • Why the US Federal Reserve is shrinking the size of its balance sheet,
  • How the Fed will implement this policy and
  • How this process could affect investors.
 

About the Authors

Jane Ihrig, Larry Mize and Gretchen C. Weinbach are professionals with the Federal Reserve Board Divisions of Monetary Affairs and Reserve Bank Operations & Payment Systems.

 

Summary

Since the onset of the 2008 financial crisis, the US Federal Reserve has conducted extraordinary monetary policy to prevent a second Great Depression and engineer a return to economic health. Successive rounds of purchases of new securities, in addition to reinvestments, in “open market operations” expanded the amount of currency in circulation and reduced the Federal Funds rate to nearly zero. In the process, the Fed’s balance sheet ballooned, going from 2006 levels of $780 billion to $4.2 trillion in 2017.


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    Rebecca Eason 6 months ago
    a good idea is to stop pulling retired feds out of retirement! It severely messes with the classified crap...lol dumbdumbs that would help save on national security...smh