Pedro da Costa had a nice piece for Business Insider on Yellen wanting to leave the Fed’s balance sheet alone.
Essentially, Yellen is extremely cautious about unwinding The Fed’s almost $4.5 TRILLION balance sheet for fear on upsetting the proverbial apple cart.
Since The Fed’s started expanding its balance sheet back in late 2008, the stock market and both residential and commercial real estate prices have been going gangbusters. Only recently has retail real estate suffered downturns (thanks primarily to Amazon).
Critics of the bond buying programs, known as quantitative easing or QE, warned that it would lead to runaway inflation. They were very wrong. Instead, inflation has struggled to even reach the Fed’s 2% target, suggesting the labor market is still too weak to push up wages significantly.
True, the labor market remains weak despite glowing adulation from the media cheerleaders about low unemployment rates. Which is not helping retails sales for the big box stores.
Yes, Yellen and The Feds are fearful of a fundamentally weak economy and its sensitivity to winding down The Fed’s balance sheet.