Huzzah! The Fed's Balance Sheet Shrinkage Appears To Have Begun!

First up, the first few line items of this week's H.4.1 report:

H.4.1

Factors Affecting Reserve Balances of Depository Institutions and Condition Statement of Federal Reserve Banks

July 7, 2022

 

1. Factors Affecting Reserve Balances of Depository Institutions

Millions of dollars

Reserve Bank credit, related items, and reserve balances of depository institutions at Federal Reserve Banks	Averages of daily figures			Wednesday Jul 6, 2022
	Week ended Jul 6, 2022	Change from week ended
		Jun 29, 2022	Jul 7, 2021
Reserve Bank credit	8,855,279	-   34,340	+  807,473	8,856,240
Securities held outright1	8,455,658	-   30,980	+  943,090	8,456,027
U.S. Treasury securities	5,743,982	-   19,747	+  553,399	5,744,344
Bills2	326,044	0	0	326,044
Notes and bonds, nominal2	4,941,958	-   22,121	+  485,923	4,941,958
Notes and bonds, inflation-indexed2	384,342	+    1,376	+   31,456	384,342
Inflation compensation3	91,638	+      998	+   36,019	92,000
Federal agency debt securities2	2,347	0	0	2,347
Mortgage-backed securities4	2,709,329	-   11,234	+  389,692	2,709,336

....MUCH MORE

 

After 16 months of very visible inflation, the balance sheet run-off was set to begin June 1.

From Trading Economics (also on blogroll at right) U.S. headline CPI monthly Year-over-Year:

source: tradingeconomics.com

From the Fed's May 4, 2022 press release: 

Plans for Reducing the Size of the Federal Reserve's Balance Sheet

....The Committee intends to reduce the Federal Reserve's securities holdings over time in a predictable manner primarily by adjusting the amounts reinvested of principal payments received from securities held in the System Open Market Account (SOMA). Beginning on June 1, principal payments from securities held in the SOMA will be reinvested to the extent that they exceed monthly caps.

• For Treasury securities, the cap will initially be set at $30 billion per month and after three months will increase to $60 billion per month. The decline in holdings of Treasury securities under this monthly cap will include Treasury coupon securities and, to the extent that coupon maturities are less than the monthly cap, Treasury bills.
• For agency debt and agency mortgage-backed securities, the cap will initially be set at $17.5 billion per month and after three months will increase to $35 billion per month.....

The Fed balance sheet held $8.915050 Trillion on June 1, 2022 and $8.891851Trillion on July 6, the cut-off date for this week's H.4.1. This is a net reduction of $23.199 billion in the first five weeks of the program. This compares to an idealized (the run-off will be choppy on a week-to-week basis) an idealized $54.80 billion for five weeks.

So, running a bit behind schedule.