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# Fed Trims Size of Asset Portfolio

### Question

The U.S. Federal Reserve’s policy responses to the economic lockdown caused by the pandemic include massive bond purchases that make it cheaper for the government and corporations to issue debt, thus providing an important lifeline for financial activity at a time of difficulty.

This is creating a massive asset portfolio (“Reserve Bank credit”) that the debt holds, which was at $8.4 trillion as of Sep 29, according to this release. The concern is such steps may contribute to price bubbles in markets and economic overheating due to excessive risk-taking. The opposite concern is that a quick asset selloff may create a market glut, lowering the cost of raising capital for companies. Will the Fed decrease the size of its accumulated asset portfolio below$8 trillion by 2023?

This resolves positive if, by Jan. 1, 2023, assets held by the Fed, according to estimates published here, are below \$8 trillion.

Categories:
Economy – US

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