I will focus on two main sets of issues that the Fed has faced and will continue to face for some time. The first involves our ongoing assessment of the effects of the asset purchases. The second concerns policy normalization in the presence of a very large balance sheet.
To set the stage, consider the size of the Fed’s balance sheet over the past several years. Assets have risen from about $ billion in 2006 to about $ trillion today, or – as seen in figure 1 – from 6 percent of nominal gross domestic product (GDP) to about 26 percent of nominal GDP.