Still, policy makers will probably want to complete a number of rate increases before they are comfortable getting the process started.
“It’s going to be, at minimum, a year of rate increases before they say, ok, let’s layer on top of that something about the balance sheet,” said William Lee, head of North America economics at Citigroup Global Markets in New York.
Traders in fed funds futures don’t expect the Fed to begin raising rates until December. That may mean the Fed will continue reinvesting principal payments from maturing bonds well into next year.
“Even then, they will not even mess with that until they are sure the markets have gotten acclimated to a rising-rate environment and a tightening environment,” said Lee, a former Fed economist. “And that won’t happen, as far as I can see, until 2017.”