The Fed Will Slow QT. What Matters Is Where It Stops

The central bank has to shrink its balance sheet enough to rebuild its stimulus arsenal, but not so much that it destabilizes markets.

With interest-rate cuts off the table for now, the US Federal Reserve will focus on a different topic at next week’s policy-making meeting: when and how to slow quantitative tightening, the process of reducing the vast securities portfolio amassed in previous efforts to support economic activity.

A final plan should be in place by the middle of this year. Whatever happens, the destination matters a lot more than the speed.