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WSJ Reports Fed Could Start to Shrink Balance Sheet
Wednesday, April 19, 2017 6:35 AM

Following two more expected quarter-point rate increases this year, the Federal Reserve could start to shrink its balance sheet, which could be later this year or early 2018, The Wall Street Journal reported on Sunday.

The WSJ said the Fed would like to downsize its portfolio for several reasons, among them a stronger economy, the political liability of maintaining a large balance sheet, and the relief it could provide to the incoming leadership in 2018 when Fed Chair Janet Yellen's term ends. Downsizing its portfolio would also allow the central bank to ramp it back up if another crisis were to come.

Last week, Yellen said the Federal Open Market Committee, the Federal Reserve's monetary policy setting arm, wants to "be ahead of the curve and not behind it" in terms of raising interest rates appropriately.

After its two-day March meeting, the FOMC announced it would raise the federal funds' target rate a quarter-point to a range of 0.75 to 1 percent.