>>20765919>>20765942The Fed can do both these at the same time, reduce MBS & long duration holdings and increase balance sheet. They like to move slowly, but they'll get there. In their 2023 Open Market Operations Report, they show they project to stop tapering the total size of their balance sheet sometime in 2025, then want to maintain their balance sheet at ~20% of GDP, which recent speeches and published research is pointing at a desire to be more exclusively tbills. Link for whole report, but it's pretty big.
>https://www.newyorkfed.org/medialibrary/media/markets/omo/omo2023-pdf.pdf