Atlanta Fed President Raphael Bostic said the central bank should be aggressive in shrinking its balance sheet, allowing its holdings to decline by at least $100 billion a month reuters.com/business/feds-…
What Bostic is talking about here is allowing some but not all of the Fed's security holdings to mature without reinvesting principal every month.
In Oct '17, the Fed started by allowing $10 billion in securities to mature every month ($6B for Treasurys, $4B for MBS)
In Oct '17, the Fed started by allowing $10 billion in securities to mature every month ($6B for Treasurys, $4B for MBS)
These amounts rose every quarter, so that by Oct '18, the Fed allowed $50 billion in securities to mature every month (Trump referred to this as the "50B's"). That was divided between $30 billion for Treasurys and $20 billion for MBS.
Bostic is talking here about allowing 2x as many securities to mature every month. Using the same proportion of Treasurys and MBS, that would imply $60 billion in Treasurys runoff per month.
So how many Treasury securities that the Fed holds are set to mature every month?
So how many Treasury securities that the Fed holds are set to mature every month?
This is a very rough chart so the precise amounts may not be current.
But for illustrative purposes, it shows that once you get through the large supply of T-bills, a $60 billion cap wouldn't bind every month. So actual runoff might be less than the $100 billion/month figure.
But for illustrative purposes, it shows that once you get through the large supply of T-bills, a $60 billion cap wouldn't bind every month. So actual runoff might be less than the $100 billion/month figure.
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