Washington, Jul 27 (IANS): The US Federal Reserve on Wednesday left its benchmark interest rates unchanged as expected amid soft inflation. But the central bank signaled that it would begin shrinking its balance sheet "relatively soon".

"The Committee expects to begin implementing its balance sheet normalisation programme relatively soon, provided that the economy evolves broadly as anticipated," Xinhua news agency quoted the Fed's policy-making committee as saying.

The Fed's balance sheet has ballooned to nearly $4.5 trillion following three rounds of quantitative easing programmes to withstand the impact of the 2008 global financial crisis.

As the US economy is back on track for steady growth, Fed policymakers are preparing to unwind its crisis-era policies to avoid igniting inflation pressures or pumping up asset bubbles.

The Fed last month raised the benchmark interest rates for the fourth time since December 2015 and unveiled a plan to trim its holdings of US Treasury bonds and other mortgage-backed securities later this year.