"Fed megaphone": Fed officials consider slowing or pausing balance sheet reduction

Odaily News Nick Timiraos, the "Fed mouthpiece," said that the minutes of the Fed's January meeting showed that officials discussed whether to slow or pause the reduction of its nearly $6.8 trillion asset portfolio at last month's meeting. They face the complex issues brought about by raising the federal debt ceiling in the coming months. Dynamics related to the debt ceiling may cause large fluctuations in the Fed's liabilities. The process of shrinking the balance sheet will eventually deplete the reserves of the banking system, and Fed officials are not sure how long this process will last. How the Treasury will manage money market fluctuations caused by its cash balance may complicate the Fed's ability to determine the correct balance of reserves. Therefore, according to the minutes of the meeting released on Wednesday, officials believed at the January meeting that "it may be appropriate to consider suspending or slowing the reduction of the balance sheet until the debt ceiling issue is resolved." (Jinshi)