– This is the script of CNBC's news report for China's CCTV on April 6, Thursday.
Welcome to CNBC Business Daily, I'm Qian Chen.
Federal Reserve officials said the shedding of the $4.5 trillion in bonds the central bank is holding on its balance sheet will begin this year.
The revelation came Wednesday from a summary of the Federal Open Market Committee meeting held in March, during which the group approved a quarter-point hike in its benchmark interest rate target.
Unwinding the balance sheet is significant both because of its sheer size and the impact it could have on markets, as Fed members including Chair Janet Yellen have indicated that the move itself would amount to a rate hike.
The Fed amassed most of the bonds it owns during three rounds of "quantitative easing," a monthly bond-buying program aimed at juicing the economy following the financial crisis. The securities are mostly Treasurys and mortgage-backed securities. It has been reinvesting the proceeds from those bonds and rolling them over rather than shrink the balance sheet.
Today, the size of the Fed's balance sheet, which has been the elephant in the room, stands at as much as $4.5 trillion.
[Daniel Tarullo, Former Fed Governer] "I do think that to some degree, it is taken as a signal by markets.I think there is some sensing which particular the yeilds curve may be influenced by the composition of the balance sheet. But that signaling effect is much as anything that does matter."
Overnight, U.S. stocks erased earlier gains to close lower Wednesday after the Federal Reserve released the minutes from its March meeting.
The S&P 500 dropped 0.3 percent, with financials lagging. The Nasdaq composite slipped 0.6 percent after hitting a new all-time high earlier in the session.
The Dow and S&P also posted their biggest one-day reversal since February 2016.
[VADIM ZLOTNIKOV, AB Chief Market Strategist and Co-Head of Multi-asset Solutions] "Oh look it's hard to know what investors focused on but one of the things thats possible is starting to come much closer to the reality of deleveraging by central banks, much like QE has helped evaluation multiples and drew markets higher, you would conclude the reversal would not be as good for the markets."
No timetable was mentioned and there wasn't any indication given that the balance sheet was in play when the FOMC released its post-meeting statement.
CNBC's Qian Chen, reporting from Singapore.