The Clap Minutes from the U.S. Federal Reserve’s last meeting laid out the central bank’s plans to reduce its bond holdings by $95 billion/month.
Backstory The Fed started buying bonds aggressively at the start of the pandemic to inject money into the economy. The Fed then saw the economy had reached healthy levels but inflation had gone out of control, so it decided to taper its assets. Now, the Fed plans to start reducing its bond holdings as soon as May 2022.
The deets The $95 billion a month reduction will be made up of 63% in treasuries & 37% in mortgage-backed securities. The $95 billion reductions is nearly double that of the last time the Fed reduced its assets from 2017 to 2019.
The minutes also strongly hinted at an interest rate increase of 0.5% at the next meeting.
Claps Class Treasuries are government-issued securities that pay a fixed rate of interest until the security matures. Mortgage-backed securities are bonds backed by home & other real estate loans.