Fed Officials Discussed Shrinking Assets by Up to $95B a Month

The Federal Reserve said it is "well placed" to start reducing its holdings starting in May.

AccessTimeIconApr 6, 2022 at 7:26 p.m. UTC
Updated May 11, 2023 at 4:57 p.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global event for everything crypto, blockchain and Web3.Register Now

Federal Reserve officials discussed reducing the U.S. central bank's bond holdings by as much as $95 billion a month, in an effort to slow the highest inflation in nearly four decades, according to minutes released Wednesday of a meeting last month.

“All participants agreed that elevated inflation and tight labor market conditions warranted commencement of balance sheet runoff at a coming meeting, with a faster pace of decline in securities holdings than over the 2017-19 period,” members of the Federal Open Markets Committee (FOMC) said.

“Participants generally agreed that monthly caps of about $60 billion for Treasury securities and about $35 billion for agency MBS would likely be appropriate," according to the minutes of the March 15-16 meeting.

In the 2017-19 period, when the Fed last attempted to shrink its balance sheet, the maximum reduction was capped at $50 billion, significantly lower than what the central bank is signaling this year.

With the release of the minutes this month, the Fed is laying the groundwork for its upcoming meeting on May 4-5, signaling traders what to expect in the coming months, which is why the impact of the central bank’s decisions can already be seen now.

U.S. stocks were already down ahead of the meeting, after several Fed officials hinted at what was discussed in the minutes.

Bitcoin (BTC) is down 5% over the last 24 hours.

The minutes also revealed that while the central bank announced it would raise interest rates by 25 basis points (0.25 percentage point) at the two-day March meeting, “many” members of the FOMC initially wanted to go for a half percentage point hike. They settled on a quarter-point hike partly because of the the uncertainty associated with the war in Ukraine.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Helene Braun

Helene is a New York-based reporter covering Wall Street, the rise of the spot bitcoin ETFs and crypto exchanges. She is also the co-host of CoinDesk's Markets Daily show. Helene is a graduate of New York University's business and economic reporting program and has appeared on CBS News, YahooFinance and Nasdaq TradeTalks. She holds BTC and ETH.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.