Will they ever shrink back to pre-crisis levels? “It’s still too early to say. There are many aspects to this issue, which is a matter of discussion in the Federal Reserve. This is also uncharted territory. What if you stop reinvesting in bonds when they reach maturity? What effect would that have on the normalisation of interest rates? Would that process then speed up?
It’s not a simple matter at all. Everything in monetary policy is interlinked. Every time you change direction, you set a chain of events in motion. Another aspect, which relates more to the functioning of financial markets, is the balance between the supply and demand for safe assets.