Federal Reserve officials will begin winding down their massive balance sheet on Wednesday at a combined monthly pace of $47.5 billion.
Biden meets with Fed Chair Jerome Powell to discuss the state of the American, global economy and inflationis poised to start shrinking its $8.9 trillion balance sheet, deploying one of its lesser-known tools as it seeks to tame the hottest inflation in a generation.
A man wearing a mask walks past the U.S. Federal Reserve building in Washington D.C., the United States, on April 29, 2020.Policymakers say the portfolio runoff will work in tandem with interest rate increases to bring prices down by slowing growth and tightening credit. The Fed voted to raise rates by a half-basis point in May and has all but promised that similarly sized hikes are on the table at upcoming policy meetings in June and July.
The question now is whether the Fed can successfully engineer the elusive soft landing — the sweet spot between tamping down demand to cool inflation without sending the economy into a downturn. Hiking interest rates tends to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut back on spending.
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