https://www.nytimes.com/2017/04/05/business/economy/fed-minutes-interest-rates.html?_r=0
It is expected that the Federal Reserve is going to reduce its investment holdings later this year. This move is signaled at Fed's meeting in March. The Fed expects the economy continue to grow, so it is the time to shuffle its reinvestment policy.
Since 2008 economy crisis, the Fed took steps to help the economy recover. The borrowing rates have been kept at near zero for long time. This crutch was used to encourage borrowing and risk taking. If the Fed pares its investment holdings by simply doing nothing with the matured securities, this move will make other securities investors to accept lower rate of return in the open market, thus the borrowing rate will go up. The reason behind is that the market keeps calm after increasing the base rate by half point back in December, 2016 and that the unimployment rate keeps low.
Though the timing and details of Fed's possible move about shrinking its investment holdings are not decided yet, it is still a very powerful signal to investors. It tells two things: first, the Fed's assessment about the economy is in line with that of the investors; second, the economic growth has been steady since Mr. Trump takes office.
Whether the Fed will gradually or abruptly pare its investment holdings will be discussed at its next meeting.
