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The US Federal Reserve's balance sheet shrinks below $7 trillion
The Federal Reserve’s asset reduction is gaining momentum. Recently, the total size of the Fed’s balance sheet dropped below approximately $7 trillion, reaching this level for the first time since August 2020. This indicates a total asset reduction of $2 trillion through quantitative tightening (QT), which is the exact opposite of the quantitative easing (QE) policy implemented over the past few years.
The Fed has officially announced its plan to continue this scale of balance sheet reduction. Specifically, it plans to reduce holdings of U.S. Treasury bonds by $25 billion per month and mortgage-backed securities (MBS) by $35 billion per month. This policy aims to control market liquidity while maintaining a high interest rate environment.