Federal Reserve to Slow Money Printing That Pumped Markets

• The U.S. Federal Reserve has announced its plans today to begin to end the $120 billion a month bond purchases that have been implemented since March 2020. This is the first step towards moving forward from the drastic economic policies taken as a result of the pandemic’s economic repercussions.

• The Fed stated that it will reduce asset purchases by $15 billion a month starting this month in November. Purchases of U.S. Treasuries will slow to $70 billion a month from $80 billion, and purchases of government backed mortgage securities will fall from $40 billion a month to $35 billion.

• Ultimately the Fed will continue this purchase slowdown until mid next year. The Federal Open Market Committee, the Fed monetary policy committee, stated that “the committee judges that similar reductions in the pace of net asset purchases will likely be appropriate each month, but it is prepared to adjust the pace of purchases if warranted by changes in the economic outlook.”

• These large scale purchases, known as “quantitative easing” (QE), have more than doubled the size of the Federal Reserve’s balance sheet since March 2020 to a high of $8.6 trillion as of last week.