Global markets spooked after minutes of the FOMC meet suggest a hawkish fed may tighten rates or crimp its balance sheet sooner than expected.
The big news from the minutes is the balancesheet reduction. What it means is they want to reduce their money supply that is important.
On December 15th FOMC said that they will cut fresh purchases by an additional $30 billion every month. Since fed was buying $120 billion of bonds per month, a reduction of 30 billion per month meant zero purchases by February. This only stops expansion of balancesheet, it doesn’t reduce the balancesheet.
Watch the accompanying video of CNBC-TV18’s Latha Venkatesh for more details.
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