Fed decided last month to stop shrinking the balance sheet as of Dec. 1
Back in 1980, George H.W. Bush derided as “voodoo economics” an argument made by some of his fellow Republicans that you could slash taxes, boost defense spending and balance the federal budget, all at the same time.
Kevin Warsh, a former Fed board member and one of the named finalists to succeed Jerome Powell as chair of the US central bank next May, said in a Wall Street Journal opinion piece that “the Fed’s bloated balance sheet, designed to support the biggest firms in a bygone crisis era, can be reduced significantly.”
Reducing the balance sheet means the Fed either outright selling the Treasuries and mortgage securities it holds (totaling over $6 trillion at last count) or letting them mature without replacement.
Policymakers are actually heading in the opposite direction: They decided last month to stop shrinking the balance sheet as of Dec. 1.
Bloomberg Economics’ David Wilcox, a former longtime Fed official, highlights that “in the case that Warsh is focused on, if the Fed shrank its balance sheet further, that action (taken in isolation) would raise longer-term interest rates” not lower them.
Bloomberg 18 November 2025
“Did you see the Fed’s announcement that it will stop QT and begin QE,” asks legendary investor Ray Dalio, the founder of Bridgewater Associates, a provocative, and arguably false, characterization of what the Fed is doing.
He is right that the Fed will stop its quantitative tightening program of reducing the size of its balance sheet, now nearly $7 trillion, on Dec. 1.
https://englundmacro.blogspot.com/2025/11/qt-not-so-fast-please.html
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