Fed officials plan to shrink the balance sheet by $95 billion a month, meeting minutes indicate

cnbc.com:

Federal Reserve officials discussed how they want to reduce their trillions in bond holdings at their March meeting, with a consensus amount around $95 billion, minutes released Wednesday showed.

Officials «generally agreed» that a limit of $60 billion in Treasurys and $35 billion in mortgage-backed securities would be allowed to roll off, phased in over three months.

At the meeting, the Fed approved its first interest rate increase in more than three years. The 25 basis point increase — a quarter percentage point — lifted the benchmark short-term borrowing rate from the near-zero level where it had been since March 2020.

In addition to the balance sheet talk, officials also discussed the pace of interest rate hikes ahead, with members leaning toward more aggressive moves.

That means potential rate hikes of 50 basis points at upcoming meetings, a level consistent with market pricing for the May vote. In fact, there was considerable sentiment to go higher last month.

«Many participants noted that one or more 50 basis point increases in the target range could be appropriate at future meetings, particularly if inflation pressures remained elevated or intensified,» the minutes said.

Uncertainty over the war in Ukraine deterred some officials from going with the 50 basis point move in March.

Stocks fell following the Fed release while government bond yields held higher.

The minutes were «a warning to anyone who thinks that the Fed is going to be more dovish in their fight against inflation,» said Quincy Krosby, chief equity strategist at LPL Financial. «Their message is, 'You're wrong.'»

Indeed, policymakers in recent days have grown increasingly strident in their views about taming inflation.

Governor Lael Brainard said