FOMC balance sheet
FOMC balance sheet: the FOMC is widely expected to announce the balance sheet unwind at next week's policy meeting. Remember it provided details on its policy normalization strategy last June. For Treasuries, the FOMC expects an initial $6 B monthly cap that rises by steps of $6 B every three months until it reaches a $30 B monthly cap within 12 months. For agency debt and mortgage-backed securities, the FOMC expects an initial $4 B monthly cap that rises by steps of $4 B every three months until it reaches a $20 B monthly cap within 12 months. The cap will then remain in place until the portfolio shrinks to the size necessary to implement monetary policy efficiently and effectively, though the FOMC may settle on a larger portfolio than held before the financial crisis. Also, the FOMC may resume reinvestment if the economic outlook deteriorates, and the Fed funds rate target proves to be an inadequate policy tool. Meanwhile, Fed officials continue to believe that with the path of the unwind being specified and gradual, the markets should show little reaction. Indeed, this should be "like watching paint dry," quipped Chair Yellen in her June press conference. Often the markets have other ideas. Analysts'll see.