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

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.

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.

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“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.”

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.



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