Fed: Unwinding QE unwind

11 September, 2019

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On 31 July, the Federal Reserve announced that it would put an end to its policy of selling chunks of its holdings of securities, so as to unwind its bloated balance sheet. Even though the task of unwinding unconventional monetary policies is far from complete, going by its 31 July announcement, the Fed has decided to hold back and reverse its policy direction.

[NOV 24 2017]As of October, the Fed will let billions of dollars of securities mature each month without reinvesting them. It will gradually increase the amount of maturing bonds each quarter over the next year. HSBC Chief Economist Kevin Logan said this process is new territory for the Fed.

“This is a big experiment,” Logan said. “It’s something that’s never been done before.”

Starting 2016, gradual rate asset sales by the Fed were presented as necessary, because “unconventional monetary policies” adopted to combat the recession precipitated by the global financial crisis (GFC) had been in place for too long, undo the policy of quantitative easing (QE).

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