Powell Says Fed 'On Track' to Return to Smaller Balance Sheet

The video discusses the Federal Reserve's approach to managing economic expansion by balancing interest rates. It highlights the risks of keeping rates too low or raising them too soon. The Fed's strategy involves gradually increasing rates and reducing the balance sheet by not replacing maturing securities. The plan aims to normalize the balance sheet size without causing adverse market reactions. The future size of the balance sheet will depend on public demand for currency and reserves.

What was the concern prior to announcing the normalization of the balance sheet?

How does the demand for reserves affect the balance sheet?