The Fed's Swollen Balance Sheet Has Its Uses

Among the many questions surrounding the Federal Reserve’s programme of quantitative easing (QE) is what will happen to the vast stockpile of bonds it has accumulated in its efforts to lower interest rates. Officials at the bank have never been comfortable with their gargantuan balance-sheet. Since 2011 they have maintained that once QE has achieved its aims, the Fed would shrink back to its former size. As its bonds mature, the story goes, they will disappear from its balance-sheet, along wit...