The Fed's balance sheet continued to shrink. Since ATH it decreased by $32.8 billion to its lowest level since January 2021 📉
👉 Shrinking the balance sheet means that the Fed is selling its holdings of assets such as government bonds and mortgage-backed securities, this is a part of tightening monetary policy, which the Fed implemented to combat inflation
By selling off assets or not reinvesting the proceeds of maturing assets, the Fed reduces the amount of money circulating in the economy and prevents the economy from overheating.
As the balance sheet shrinks, it can lead to a rise in longer-term interest rates, affecting everything from mortgage rates to bond yields 📈
