A Former Fed Trader Predicts Ugly Times as the Central Bank Shrinks Its Balance Sheet

Now, with inflation rampant, the Fed is unwinding this liquidity via a process known as quantitative tightening, or QT. In June, the central bank started to shrink its portfolio by letting up to $30 billion of Treasuries and $17.5 billion of mortgage-backed securities, or MBS, roll off its balance sheet, or mature without reinvesting the proceeds. The amount will double this month and effectively kicks in Sept. 15, as Treasuries are redeemed midmonth and at the end of the month.