Federal Reserve Chair Janet Yellen has said she wants to shrink the central bank's $4.5 trillion balance sheet in an “orderly and predictable way” that limits risks to the economy. The hurdles to getting that done are high.
The economic impact, the pace of the drawdown and its ultimate end point are all partly subject to forces beyond the Fed's control. That could mean that the financial markets and the economy may be in for more tumultuous times than Yellen and her colleagues are hoping for.
“We don't really know how it's going to go,” said Richard Clarida, global strategic adviser for Pacific Investment Management Co., which oversees $1.5 trillion in assets. “There's not all that much precedent” for the position that the Fed finds itself in.
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