Once we start to reduce our reinvestments, our securities holdings will gradually decline, as will the supply of reserve balances in the banking system. The longer-run normal level of reserve balances will depend on a number of as-yet-unknown factors, including the banking system’s future demand for reserves and the Committee’s future decisions about how to implement monetary policy most efficiently and effectively.
The Committee currently anticipates reducing the quantity of reserve balances to a level that is appreciably below recent levels but larger than before the financial crisis. Finally, the Committee affirmed in June that changing the target range for the federal funds rate is our primary means of adjusting the stance of monetary policy.