Why the Fed is unlikely to reduce its assets on the balance sheet?

The evolution of the US Federal Reserve's monetary policy is once again being speculated on as some sections of market participants are becoming presumptuously inclined to the comments made by regional members of the Fed in terms of different approaches that are still available to the central bank in tightening the monetary environment.

A commonly referred to figure that forms the basis of argument for some critics is found in the form of the Fed's balance sheet, all the assets purchased or sold in the process of controlling money supply.

Before the start of the Financial Crisis in 2008, the Federal Reserve had an accumulated $1 trillion worth of assets. From this point onwards it expanded this figure to well over $4.5 trillion through three separate bond purchasing programs, otherwise known as Quantitative Easing, which is often cited as unsuccessfully rebooting the US economy and triggering similar programs in other developed nations.  

Top Fed officials are in no hurry to reduce their $4.5 trillion portfolio of securities and other assets https://t.co/W1JPw9lBWi

— Real Time Economics (@WSJecon) February 27, 2017

Assessing the current tempo of the FOMC's interest rate hikes, the US has only seen two such event from an expectant six forecasted at the beginning of the policy shift in December 2015.

This leaves interest rates at 0.75%, a miniscule reflection to the heights of its tyranny of yesteryear.

Yet the impact of a 50 basis points rise in interest rates on the global financial system holds more gravitas than its counteraction and thus been implemented with more awareness to any negative influence it may impose of the system.

Will the Fed be liberal in it's approach to reduce its assets?

Highly unlikely as its conservative stance in hiking would be in direct conflict with this type of action which it believes could have adverse impacts on the stability of the financial system as a whole.

It isn't surprising that we haven't seen much activity coming from the Fed as factors placing a strain on the world economy has caused politicians to become distracted from the primary objective of returning the globe to signs of encouraging economic activity.

US President Donald Trump could play a pivotal role for the Fed though if his economic policy ignites the engines of growth and spurs inflation to exceed through its current ceiling. If we were to see a quickening of inflation, the real value of debt levels in the US could be dramatically reduced.

However judging by the hostility between Trump and his nation, there are no certainties of this happening.

The Fed will be hoping for a better response to Trump's proposed budget measures which he campaigned as "Less Taxes, More Spending" in an effort to use it as a platform from which it can execute interest rate hikes with certitude that the US economy will be able to absorb hikes with a measure of sustainability.