A significant shrinking of the balance sheet can be accomplished relatively quickly, as a substantial portion of the assets that the Federal Reserve holds – including loans to financial institutions, currency swaps, and purchases of commercial paper – are short-term in nature and can simply be allowed to run off as the various programs and facilities are scaled back or shut down.
It would be reasonable to anticipate that a decline in confidence arising from the recent events internationally may well dampen demand somewhat compared with the outlook set out in the Statement on Monetary Policy published in early August. That, together with the increased visibility of structural change in the economy, may also condition wage bargaining and price setting.