Bullard: Fed should shrink balance sheet to gain policy space

Author: Adam Button | Category: Central Banks

Sounds good in theory

But the Fed is talking about shrinking its balance sheet at a glacial pace. They're not talking about selling bonds, or even letting expiring bonds run off. They're talking about slowing the pace of reinvestment. So instead of buying new bonds with 100% of the expiring ones, they're talking about only reinvesting perhaps 90%. That isn't going to open up any significant space for future stimulus.