Fed officials weighed slowing or pausing bond drawdown last month

At the January meeting, Federal Reserve officials expressed concerns about managing the ongoing drawdown of their balance sheet. They noted that a pause or slowdown might be appropriate until clarity on the U.S. Treasury’s debt issuance becomes available.

The Federal Reserve has reduced its balance sheet by over $2 trillion since its peak, yet officials are wary of overshooting their quantitative tightening efforts. Adequate market liquidity readings are crucial to deciding the continuation of this process.