Fed’s Focus Shifts: Slowing QuantitativeTightening is Key

The central bank has to shrink its balance sheet enough to rebuild its stimulus arsenal, but not so much that it destabilizes markets.

With interest-rate cuts off the table for now, the US Federal Reserve will focus on a different topic at next week’s policy-making meeting: when and how to slow quantitative tightening, the process of reducing the vast securities portfolio amassed in previous efforts to support economic activity.

A final plan should be in place by the middle of this year. Whatever happens, the destination matters a lot more than the speed.