See the Federal Reserve Bank of New York’s report and accompanying data file, “Projections for the SOMA Portfolio and Net Income (July 2017).” 15 These liabilities include Federal Reserve notes (U.S. dollar paper currency), the U.S. Treasury’s General  Account, deposits held by designated financial market utilities and government-sponsored enterprises, and reverse repos conducted with foreign and international account holders. On average, these line items summed to over $ billion in 2017, on top of more than $ trillion in Federal Reserve notes. Fed liabilities are discussed more thoroughly in Lorie Logan, “Implementing Monetary Policy: Perspective from the Open Market Trading Desk,” remarks before the Money Marketeers of New York University, New York City, May 18, 2017. 16 It is worth noting that the size and structure of Fed’s securities portfolio and the role the portfolio played have  undergone substantial shifts at various times over the course of the Fed’s history, reflecting changes in policy implementation imperatives. See Meryam Bukhari et al, “The SOMA Portfolio through Time,” Federal Reserve Bank of New York Liberty Street Economics (blog), August 12, 2013. 17 Throughout this discussion, I focus on forward guidance and use of the central bank’s balance sheet (through  large-scale purchases of additional assets and reinvestment policies, but not funding for lending programs) as possible tools. U.S. policymakers have shown little appetite to pursue negative nominal interest rates, although that is another unconventional tool used by several central banks in recent years.
However, the FOMC said it would be prepared to resume reinvestments if a “material deterioration in the economic outlook were to warrant a sizable reduction in the Committee’s target for the federal funds rate,” and it would be prepared to use its “full range of tools, including altering the size and composition of its balance sheet, if future economic conditions were to warrant a more accommodative monetary policy than can be achieved solely by reducing the federal fund rate.” These conditions help identify the types of circumstances that might lead to some adjustments in the balance sheet normalization process, although Chair Yellen has noted there is a high bar for altering the balance sheet’s current course.10 The FOMC’s balance sheet reduction strategy lays out a gradual and predictable path for portfolio runoff, which should reduce the risk that balance sheet normalization will generate 2 / 13  BIS central bankers' speeches  undesirably large asset price reactions, volatility, or disruptions to financial markets or Treasury debt issuance.11 That strategy—together with the FOMC’s steady communications throughout 2017 as the Committee developed it well in advance of implementing any change in policy—has helped to keep market expectations closely aligned with the FOMC’s intentions. The market response to the commencement of the Fed’s balance sheet reduction has been calm.