VTI - Fed To Begin Tapering Their Balance Sheet Runoff And Other Observations

2024-05-02 16:45:21 ET

Summary

• The Fed will maintain the Fed Funds Rate target range at 5.25-5.50% and begin tapering the runoff of securities holdings from their balance sheet.
• The tapering of Quantitative Tightening (QT) will be done gradually to prevent liquidity problems.
• The Fed will change its reinvestment policy of maturing mortgage-backed securities (MBS) to reinvest in Treasury securities, aiming to return the SOMA portfolio to only holding Treasury securities.

In their Policy Statement following the conclusion of their third FOMC meeting of the year, the Fed announced that they would maintain their Fed Funds Rate target range at 5.25-5.50%, and that they would begin to taper the runoff of the securities holdings from their balance sheet....

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