The Fed has begun reducing its balance sheet

Sources: Bloomberg and Wells Fargo Investment Institute. Weekly data from January 4, 2006 to June 30, 2022. Shaded area represents time frame of a U.S. economic recession. Fed = Federal Reserve.

Key Takeaways

  • The Federal Reserve (Fed) is reducing its balance sheet through quantitative tightening. While the Fed began to decrease its balance sheet in early 2018, the pandemic hit before it normalized.
  • The Fed plans to shrink its balance sheet through a passive runoff of maturing securities, now that it has completed its securities purchases under quantitative easing.