- Bloomberg Business – The Long-Awaited Fed Balance Sheet Taper Begins Today With Mortgages
Today’s the Big Day for investors in U.S. mortgage-backed securities. After months of debate and conjecture about what’s become known as the Federal Reserve’s balance-sheet taper, the New York branch will announce at 3 p.m. its purchase schedule for a $4 billion per month roll off in the central bank’s holdings. The amount allowed to roll off will rise to $8 billion a month in January, to $12 billion a month in April and then ramp up in stages until it reaches a maximum of $20 billion in October 2018.
Comment
The chart below shows the size of the Federal Reserve’s balance sheet and an estimate of its future path in gray. The estimate is derived from the Fed’s stated path combined with realized major economic and inflation releases. In other words, this is the expected path for the balance sheet assuming the Federal Reserve remains truly data-dependent.
