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Why Now? The Question the Fed Won't Answer - FINANCIAL-24

Why is the Fed considering reducing its absurdly large balance sheet?  Why now?

It is hard to find any rationale at all for Fed policies these days.  Is this proposed "reduction in the Fed balance sheet" meant to be a "tightening move?"  If so, why?  What about the current economic performance of the US requires a "tightening move?"

Why was the balance sheet expanded to these levels in the first place?  No one knows, except Bernanke.  But, he's not telling.

Fed policy is adrift.   Yellen says that her models predict higher inflation in the next year or two.  But, that's what Fed models have been predicting for a decade.  And, such models have proven to be consistently wrong.  Inflation has gone nowhere.

The Fed balance sheet should never have been expanded to the ridiculous levels that we currently observe.  Nothing in the current economic data cries out for any Fed action at all, as it didn't back then.

Is this just all politics?  Yellen is a liberal democrat and democrats are not in office.  Maybe Yellen hopes that reducing the Fed balance sheet and raising rates will crush the Republicans and help elect Democrats. 

Other than that rationale, it is difficult to see any other purpose for Yellen's Fed policies.

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