WASHINGTON (Reuters) – The Fed’s holdings of Treasury bonds and mortgage backed securities is projected to decline by roughly $2.5 trillion by mid-2025 to roughly $5.9 trillion, when the central bank’s run-off of assets is likely to be halted to maintain an adequate level of bank reserves, the New York Fed said on Tuesday.
In an annual report on the Fed’s open market operations, the New York Fed said that it expected the balance sheet at that point could be held constant for a year, at an estimated 22% of gross domestic product, then grow again in proportion to the economy. The Fed as of June will allow its balance sheet to shrink as part of its move to tighten monetary policy, with monthly declines likely to hit about $80 billion monthly through 2024, the New York Fed estimated.
(Reporting by Howard Schneider)
