Daily News: June 11, 2014

Fed Prepares to Keep Super-Sized Balance Sheet

Bloomberg reported that Fed officials, concerned that selling bonds from their $4.3 trillion portfolio could crush the U.S. recovery, are preparing to keep their balance sheet close to record levels for years.

Bloomberg said the strategy, which would make the Fed one of the biggest players in money markets, carries risks. In a time of crisis, investors could flock to safe short-term instruments created by the Fed, potentially starving the rest of the financial system of funding.

Bloomberg notes the Fed’s asset purchases have expanded its balance sheet to 25% of gross domestic product from 6% at the start of 2007. Fed officials led by Chair Janet Yellen anticipate raising their benchmark federal funds rate next year for the first time since 2006, Bloomberg said.

To read the entire Bloomberg article, click here.