In addition, the Fed has been discussing and testing other supplementary tools, such as term reverse repurchase agreements and term deposits, and can use these tools as needed to help support money market rates. With regard to balance sheet normalization, the FOMC has indicated that it does not anticipate selling agency mortgage-backed securities.
When the time comes, we plan to normalize the balance sheet primarily by ceasing reinvestment of principal payments on existing holdings. When the FOMC chooses to cease reinvestments, the balance sheet will naturally contract, with a corresponding reduction in reserve balances.