Fed Officials Leaning Toward Bigger Is Better on Balance Sheet

Thu, December 08, 2016


While nearly all eyes are on the Federal Reserve’s likely decision to raise short-term interest rates next week, investors in the world’s biggest debt market say central bankers have already signaled a major change in another policy tool.

Fed officials have indicated they may make their super-sized balance sheet of bond holdings and $2 trillion in excess reserves created during the last financial crisis a more permanent feature of the way they interact with financial markets.

…“The large balance sheet has become the status quo,” said Lou Crandall, chief economist for Wrightson ICAP LLC in Jersey City, New Jersey. “It is no longer experimental.”