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FOMC Jan Minutes Preview: QT Details To Wait Until March (2/3)

FED

On the topic of QT tapering, Powell on Jan 31 mentioned "we had some discussion of the balance sheet" though he cast doubt on an announcement as soon as March and/or initiation soon thereafter ("We are planning to begin in-depth discussions of balance sheet issues at our next meeting in March...questions are beginning to come into greater focus about the pace of runoff.").

  • There’s little detail expected in the Minutes – the central view appears to be that the FOMC will be to signal its general intentions for QT after agreement in March, with an announcement to come in May or June and implementation around that time. FOMC communications since January have suggested little urgency to slow balance sheet runoff imminently.
  • The general view is that runoff for Treasuries will be halved to $30B/month from the existing $60B for some months toward end-year, with QT eventually halted, perhaps by year-end – though there is a difference of opinions on the exact parameters, including start and end dates, and speed of tapering. (MBS caps are not seen being changed from $35B).
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