Fed’s balance sheet: +$ 5tn

This is roughly the amount that the portfolio of securities held by the Fed will have increased when the asset purchase programme draws to a close around mid-2022. The Fed holds approximately one-quarter of the outstanding federal debt (15% before the pandemic), which acts as a drag on long-term rates. There is an excess of liquidity in the money market, as evidenced by the massive use of the reverse repo facility. Even so, the central bank is not actively reducing its imprint in...