The effect of the Federal Reserve’s quantitative tightening is “relatively modest” in comparison to the degree of monetary accommodation provided through quantitative easing, research published by the Fed says.

In an economic letter, Cynthia Doniger and co-authors set up two scenarios: a baseline scenario where the Fed reduces its balance sheet as it has done since 2014; and an alternative scenario where the asset holdings are kept constant. The authors then examine what adjustments to the