U.S. Federal Reserve members appear to be on the same page on to unravel the mammoth stimulus implemented during the 2008-09 financial crisis.
The American central bank is holding a $4.5-trillion portfolio of mostly government debt it accumulated in the years after the crisis. Until now, the Fed has been taking the proceeds it receives from maturing debt and re-investing them in more bonds.
Lately, though, Fed honchos have been indicating that the balance sheet will be unwound, likely starting later this year, raising questions from investors about how the process will work and what impact it will have.
According to minutes released Wednesday from the Federal Open Market Committee (FOMC) meeting earlier this month, the central bank sees a system where it will announce cap limits on how much it will allow to roll off each month without re-investing. Any amount it receives in repayments that exceeds the cap limit will be re-invested.
Caps will be set at low levels initially then gradually raised every three months, according to the meeting summary. The cap level would reach a limit that would be designed to take the balance sheet down to a certain level — perhaps around $2.5 trillion
The process comes as the Fed embarks on a gradual path toward normalizing interest rates. The central bank set its benchmark target to near zero during the crisis but has enacted three rate hikes since then, the most recent being in March.
North of the border, the Bank of Canada Wednesday maintained its overnight lending rate at 0.5%, as was widely expected.
