With the federal funds rate still quite low and expected to rise only gradually, there is some benefit to maintaining a larger balance sheet for a time. Doing so should help support accommodative financial conditions and so reduce the risks to the economy in the event of an adverse shock.
Consistent with this view, the Committee has decided to continue to reinvest principal payments from its securities portfolio until normalization of the federal funds rate is well under way. The decision about when to cease or begin phasing out reinvestment will depend on how economic and financial conditions and the economic outlook evolve.