Federal Reserve officials have begun debating how to approach shrinking a stockpile of more than $8 trillion of bonds as a key element of a policy-normalization campaign in the wake of unprecedented moves to shore up the economy during the pandemic.
While there was a consensus that current conditions are notably different to the last time that the Fed embarked on scaling down its balance sheet, a diversity of views emerged at the Fed’s Dec. 14-15 meeting, minutes of that session showed on Wednesday.
The discussion last month began with a presentation by Fed staff members on the last policy-normalization campaign, which started with raising the key overnight interest-rate target and then two years later was complemented by shrinking the central bank’s bond portfolio.