The Federal Reserve will shrink its prodigious balance sheet "considerably" once the US economy has reached maximum employment and the Fed's monetary policy has normalised, Janet Yellen, the bank's chair, told Washington lawmakers yesterday.

Yellen said she expected the Fed, whose balance sheet is currently estimated at more than $4 trillion – four times larger than before the financial crisis – to give "definitive guidance" on when it would stop reinvestment of maturing principal "as we come