Federal Reserve weighing how reduce balance sheet

Federal Reserve officials are still weighing how fast and when to reduce the size of its balance sheet, which grew during the recession behind the purchase of mortgage-backed securities. 

Most of the Fed's board members preferred that the $1.1 trillion in securities be sold gradually, completing sales about five years after they begin, according to the Fed's minutes from its April 27-28 meeting in Washington, released today. 

A slower pace would allow the Fed to adjust sales to changes in economic and financial conditions, according to the minutes. 

As far as timing, the majority of the Federal Open Market Committee preferred starting asset sales some time after the first increase in short-term interest rates. 

Fed Chairman Ben Bernanke and his colleagues have said they expect interest rates to remain low for the foreseeable future. 

Fed officials haven't publicly addressed the issue of how they will proceed. The Fed loaded up its balance sheet by purchasing mortgage-backed securities through a program, which ended in March, designed to lower the costs of home loans and bolster the weakened housing market. 

"Meeting participants agreed broadly on key objectives of a longer-run strategy for asset sales and redemptions," although some wanted to announce a schedule that sales would begin soon, according to the minutes. 

Meanwhile, the Senate and House have voted, in varying degrees, to audit the Fed's books, examining its actions during the recession.