Why the Fed’s balance sheet is expected to top $9 trillion after it starts reducing its monthly asset purchases

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It ain’t over till it’s over.

The Federal Reserve may be exploring ways to eventually reduce its large-scale asset purchases, but its influence on financial markets and the economy will be felt for years to come.

The Fed’s hulking balance sheet, which topped $8 trillion this summer for the first time ever, also probably is a long way off from peaking.

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That’s Brian Rehling, head of global fixed income strategy at the Wells Fargo Institute, pointing to the New York Fed’s own projections that the central bank’s balance sheet will peak at $9 trillion by the end of 2022 — and remain constant in size through 2025.

“While Fed tapering whispers may have started, we expect it to be long and drawn out,” Rehling wrote in a note Monday. “Once the Fed begins the tapering process, we anticipate it will be about one year before the Fed stops increasing the size of its balance sheet.”

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This chart shows how over the past 13 years and two major crises, the Fed’s balance sheet hit $8 trillion and growing, up from $900 billion in mid-2008.

www.marketwatch.com/story/why-the-feds-balance-sheet-is-expected-to-top-9-trillion-after-it-starts-reducing-its-monthly-asset-purchases-11626135642?siteid=yhoof2

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