With economy rolling, Fed to unload $4.5T in bonds

WASHINGTON — The Federal Reserve is figuring out when to start unloading much of its $4.5 trillion in bond holdings — a major turning point for an economy still healing from the 2008 financial crisis.

Some Fed officials want to announce the beginning of the process “within a couple of months,” according to minutes of the U.S. central bank’s June meeting released yesterday. Others pushed for more time to first see how the broader U.S. economy fares during the second half of 2017.

What Fed officials all agreed upon in June was to publicly unveil its plan to gradually reduce the portfolio of bonds that built up after the Great Recession — which was part of an effort to make long-term borrowing more affordable and spur growth. The economy has now reached a solid enough point that the Fed may look to begin unwinding its holdings at some point this year.

Fed officials, led by chair Janet Yellen, appear to have felt reasonably confident about the economy in June. The strengthening job market left most of them comfortable with raising a key short-term rate last month. They voted 8-1 to increase the federal funds rate by a quarter-point to a stil-llow range of 1 percent to 1.25 percent.

The decision to reduce the Fed’s holdings came across as a sign of optimism for an economic recovery embarking on its ninth year.

The Fed would start with monthly reductions in Treasury holdings of no more than $6 billion and $4 billion in mortgage bonds. Those figures would rise in increments over a year until they reach $30 billion a month in Treasurys and $20 billion in mortgage bonds.