Minutes Signal Fed to Shrink Balance Sheet by $95B/Month

The video discusses the Federal Reserve's plans for reducing its balance sheet and potential interest rate changes. The Fed may start reducing the balance sheet as early as May, with monthly treasury caps set at $60 billion and $35 billion for mortgage-backed securities. There is also a possibility of selling mortgage-backed securities, which could surprise the market. The Fed is debating between a 50 and 25 basis point interest rate increase, considering the uncertainty from Russia's invasion of Ukraine. Market reactions show stable yields, and the current plan is more aggressive compared to previous cycles, with higher caps and a faster start.

What is the anticipated monthly cap for treasury reinvestment according to the Fed's plan?

• 50 billion

• 60 billion

• 80 billion

• 70 billion

What is the significance of the Fed's decision to potentially sell mortgage-backed securities?

• It is a common practice in balance sheet reduction

• It may surprise market participants

• It will have no impact on the market

• It is a strategy to increase inflation

Why did the Fed decide on a 25 basis point increase instead of 50?

• Because of geopolitical uncertainties

• To encourage consumer spending

• To stabilize the stock market

• Due to inflation concerns

What is the expected impact on the two-year yield as discussed in the video?

• Increase by 10 basis points

• Remain stable

• Decrease by 2 basis points

• Increase by 5 basis points

How does the current balance sheet reduction plan compare to the one in 2017?

• It is faster and more aggressive

• It has the same pace and strategy

• It is slower and less aggressive

• It is delayed compared to 2017