"Unveiling the Fed's QT Tapering Strategy: Navigating the Path Ahead"

The Federal Reserve is considering how to slow the shrinking of its balance sheet, a policy tool used to tighten financial conditions and combat inflation. This "quantitative tightening" involves allowing bonds to mature, which pushes up long-term interest rates. The Fed aims to avoid market upheaval by slowing the pace of its balance sheet runoff, possibly tied to the level of money market reserves. Officials view this strategy as independent of interest rate policy, with some expecting a decision on the balance sheet at an upcoming meeting.