WASHINGTON – The Federal Reserve is announcing that it will begin shrinking the enormous portfolio of bonds it amassed after the 2008 financial crisis to try to sustain a frail economy. The move reflects a strengthened economy and could mean higher rates on mortgages and other loans over time.
The Fed will let a small portion of its $4.5 trillion balance sheet mature without being replaced, starting in October with reductions of $10 billion a month and gradually rising over the next year to $50 billion a month.
The central bank is leaving its key short-term rate unchanged but hinting at one more rate hike this year if persistently low inflation rebounds. The Fed policymakers' updated economic forecasts show an expectation for three more rate hikes in 2018.