Rising US debt may limit Fed’s ability to shrink balance sheet
Incoming Federal Reserve chief Kevin Warsh plans to reduce the central bank’s footprint in financial markets.
The US debt load and rising long-term interest rates may constrain these plans.
Yields on US Treasury bonds have increased, with the 2-year bond interest rate exceeding 4% and the 30-year bond interest rate topping 5.1%.
Investors expect the Warsh Fed to hike rates as soon as January, which may impact the Fed’s ability to shrink its balance sheet.