This paper discusses how a Federal Reserve issued retail central bank digital currency (CBDC) couldaffect U.S. monetary policy implementation. Using a stylized balance sheet analysis, we analyze theeffect a retail CBDC could have on the balance sheets of the Federal Reserve, commercial banks, andU.S. households. Then we consider how these balance sheet changes could affect monetary policyimplementation for the Federal Reserve. We illustrate that the potential effects on monetary policyimplementation from a retail CBDC are highly dependent on the initial conditions of the FederalReserve’s balance sheet. Moreover, the analysis demonstrates how the Federal Reserve may use itsexisting tools to manage the effects of a retail CBDC on monetary policy implementation.