In relationship to GDP, the balance sheet will continue to shrink until some magic unknown point is reached.
The Fed has a new plan for what to do with its balance sheet and today announced several major components of it:
- Begin tapering the "runoff" of Treasury securities in May.
- End the runoff of Treasury securities on September 30.
- Continue shedding mortgage-backed securities ((MBS)) at the current maximum of $20 billion a month, essentially until their gone.
- After September, reinvest MBS principal payments into Treasury securities.
- Chair Jerome Powell said during the press conference that the