NEW YORK, (Reuters) – The U.S. Federal Reserve may resort to asset sales in order to decrease its balance sheet to combat unabated inflation. Credit Suisse An analyst reported that (SIX).

The Fed’s financial position nearly doubled to almost $9 trillion during the pandemic. This was because it bought bonds to lower longer-term rates to sustain the economy.

This has resulted in rising inflation and excessive leverage as well as high stock market valuations.

In a report last week, Zoltan Pzsar, Credit Suisse analyst, stated that previous rounds of “quantitative loosening”, which is a reverse of the Fed’s bond-buying program, had been slow. However, this time the Fed could move faster.

“Last time, QT was meant to be like ‘watching paint dry’ – slow and steady … This time around, QT is more about scraping the paint off the wall – the fresco painted during the first two years of the pandemic is out of date”, he said.

Last year, the Fed attempted to reduce its balance sheet. In 2018, they allowed a few bonds to mature. The principal was not reinvested into new securities.

Pozsar stated that “outright asset sale, if inflation or exuberance, and a curve inversion dictate so, are not at any time unlikely”.

The bank’s reserve funds and overnight reverse purchase balances, as well as money market fund liquidity, will most likely become depleted.

Demand for the Fed’s reverse repo facility surged last year as financial firms struggled to find places to invest their excess cash.

Investors will focus on the Fed policy meeting next week. This will provide clues about whether the U.S. central banking will fasten the end to its bond purchasing program or when it will likely begin reducing its balance sheet.