ECONOMY/FEDERAL RESERVE: “The Federal Reserve resorted to a series of shock-and-awe stimulus campaigns to stabilize the economy after the financial crisis. Now the Fed is preparing the final move to unwind its support—and it wants to be as boring as possible.
The central bank is likely to announce Wednesday [9-20-17] it will start slowly shrinking its $4.2 trillion portfolio of mortgage and Treasury bonds purchased during and after the financial crisis. It will do so passively by allowing some bonds to mature without replacing them next month.
The markets haven’t blinked at Fed signals for many months that this moment was nearing. But plenty could still go wrong. The central bank has never before had such a large balance sheet or attempted to do this.
If it succeeds, the central bank will quietly close a chapter on an extraordinary policy experiment that lowered borrowing costs for homeowners, businesses and consumers, and will provide a model for other central banks that followed suit. A misstep could disrupt growth at a time when major economies are finally expanding in sync.
Chairwoman Janet Yellen’s management of the process will shape the final verdict on whether the bond-buying was successful, which in turn could determine whether it remains a policy tool for future downturns.
Other central banks that adopted such programs are watching, particularly the European Central Bank, which is considering whether to wind down its asset purchases next year.”
-Nick Timiraos, “The Fed, a Decade After the Crisis, Is About to Embark on the Great Unwinding,” The Wall Street Journal online, Sept. 18, 2017 11:00am