Fed economists tackle question of optimal balance sheet size
Cutting balance sheet would significantly reduce interest rate risk, economists find
Economists from across the Federal Reserve System have jointly published research into the optimal size of the Fed’s balance sheet, taking into account political economy risks due to falling profits as asset holdings are wound down.
“Longer-run portfolio choices could have important consequences for the level and variability of earnings remittances to the US Treasury, both during and after the transition period,” the authors say.
The problem is a pressing one. Though the Fed has started a
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