Fed's monetary policy report: plans to stop tapering at the right time

The Federal Reserve released its semi-annual monetary policy report, in which it mentioned that the Fed continues to reduce its holdings of U.S. Treasury and agency securities in a predictable and significant manner. Since June 2024, the Fed has reduced its securities holdings by $297bn, a cumulative reduction in securities holdings of about $2 trillion since the start of balance sheet tapering. The Federal Open Market Committee (FOMC) has indicated that it intends to maintain securities holdings at a level consistent with the efficient conduct of monetary policy under an adequate reserve system. To ensure a smooth transition, the FOMC slowed the rate of decline in securities holdings in June 2024 and intends to stop reducing securities holdings when reserve balances are slightly above the level it considers consistent with adequate reserves.