A majority of Federal Reserve officials project the bank will begin normalizing the size of its balance sheet later this year by ending the policy of reinvesting its maturing assets, according to minutes of the central bank's March policy meeting.
Federal Open Market Committee members voted March 15 to raise the target range for their key interest rate by 0.25%. Most policymakers at the meeting projected that they will approve further "gradual increases" in interest rates, according to the minutes. Policymakers' steps to lift rates have also driven interest among investors about when the Fed will move to begin drawing down the size of its balance sheet — a step they appear ready to take before the end of 2017.
"Most participants ... judged that a change to the committee's reinvestment policy would likely be appropriate later this year," according to the minutes of the meeting. Some Fed officials have floated the concept of putting the balance sheet on "autopilot" in recent weeks, a strategy the minutes indicate has the support of key Fed officials.
"Many participants emphasized that reducing the size of the balance sheet should be conducted in a passive and predictable manner," the Fed said in the meeting minutes. The minutes also said that most policymakers hope to reduce both the central bank's mortgage-backed securities and Treasury holdings when they halt their reinvestment policy.
Fed officials continue to believe that inflation will steadily rise toward their long-run 2% goal, and they noted that one January reading of price levels showed that the Fed had nearly reached its 2% goal over the previous 12 months.