Fed officials have no plans to change balance sheet drawdown

U.S. Fed Chair Jerome Powell and Federal Reserve Bank of New York President John Williams see no reason to change the Fed's balance sheet drawdown. Currently, the Fed needs to reduce its $8.6 trillion asset portfolio. In order to meet the goal, it plans to allow $95 billion in Treasury bonds and mortgage-backed securities to mature each month.

The action to reduce the balance sheet is part of the Fed's tight monetary policy aimed at curbing inflation. It’s worth noting that it has the highest level in the last 40 years. The centerpiece of current policy is the Fed's interest rate hike.

Fed officials haven’t given a clear timeline or number for the cuts, but analysts are making predictions. Assets could shrink so badly next year that officials will have to either slow the pace of the cuts, or stop them altogether.

The reserves of the banking system are currently estimated at about $3 trillion, down $1 trillion from last year. The Fed will be able to maintain the necessary interest rate range (3.75% to 4%) as long as reserve levels remain stable.