NY Fed report sees several more years of balance sheet contraction

In its annual report for its System Open Market Account for 2022, the New York Fed has outlined the path forward for the Federal Reserve, revealing that it is currently on a path to reduce the size of its massive holdings of cash and bonds. However, the Fed is expected to experience several years of negative net income. The bank’s holdings, which stand at $8.7tn, are likely to drop to about $6tn by mid-2025. They will then grow back to $7.2tn by 2030. For now, the Fed has also increased bond buying to keep inflation at bay.