Federal Reserve's Plans to Shrink Its Monstrous Balance Sheet Could Have Terrifying Effects on Consumers

The Federal Reserve is looking to shrink its massive $4.5 trillion balance sheet.
Author:
Publish date:

The Federal Reserve is looking to shrink its massive $4.5 trillion balance sheet. 

The central bank spent trillions of dollars since the 2008 financial crisis buying bonds and other securities in an effort to stimulate the economy. 

To shrink its balance sheet, the Fed may stop reinvesting in new bonds. If that were to occur, demand for bonds would fall, causing bond pricing to fall. If bond pricing falls, yields will rise because prices and yields move in opposite directions.

Rising yields may increase borrowing costs for consumers.

More From TheStreet: