The Fed Prepares to Sell Its Securities

Lazarus Ziozis, Editor

The Federal Reserve is moving quickly to make final decisions on how it will decrease its securities holdings in the upcoming years. This process could start this year and become the next big challenge for investors whom have been used to a central bank with an expansionary policy for the best couple of years.

The Fed wants to move toward a smaller portfolio for several reasons. The economy is now more stable, leaving less need for support from a central bank with many holdings. The large holdings have become a political liability and have been unpopular in Congress.

The Fed moved closer to agreement on the outlines of their new plan at their March 14-15 meeting.

Officials want the federal funds rate to remain the main tool for managing monetary policy.

At the end of 2013, the Fed owned nearly $750 billion in U.S. Treasuries with maturities between seven and 10 years. That total had fallen to $200 billion at the end of last year and is on track to reach $100 billion at the end of this year.

The goal of the Fed for the next couple of months will be to continue to decrease the amount of capital they have in maturities.