The Federal Reserve made headlines at its May meeting when it raised interest rates by the single biggest hike since 2000, but another lesser-known decision — albeit a substantially more complex one — could have an even greater influence over how much you pay to borrow money.
The Fed said in May that it’s going to soon start shrinking its massive near-$9 trillion bond portfolio. The decision is almost seven months in the making, but officials are going to ease their way into it. Starting June 1, they’ll let $47.5 billion worth of assets roll off their books, more formally known as the balance sheet. Then, that number will increase to $95 billion by September.
Why does the Fed’s shrinking balance sheet matter?
