Ylan Mui has the details of yesterday’s Federal Open Market Committee meeting, in which Federal Reserve Chair Janet Yellen laid out a plan to draw down the Fed’s massive stimulus program in light of the economic recovery and the upward trajectory of the job market:
The improving outlook means that the recovery no longer needs as much support from the nation’s central bank. Since the start of this year, the Fed has been slowly reducing the amount of money it is pumping into the economy. The central bank said Wednesday it will reduce its purchases of Treasuries and mortgage-backed securities to $15 billion in October, down from $85 billion a month last year. The Fed expects to end the program altogether when it meets next month.
Still, the Fed said it will maintain the size of its balance sheet for now –which stands at $4.4 trillion — by reinvesting maturing securities. The Fed holds more than four times as many assets as it did before the 2008 financial crisis. Though the central bank said Wednesday it is committed to shrinking the balance sheet to a more normal size, it formally announced it does not plan to sell any of its assets, a reversal of the plan laid out three years ago. Instead, the Fed said it will eventually stop reinvesting maturing securities and let them run off. However, the central bank said Wednesday that process will not start until after it has successfully raised its benchmark interest rate.
Neil Irwin rejoices at the prospect of a return to boring monetary policy: