Real-time Actionable Insight
Get the latest on Central Bank Policy and FX & FI Markets to help inform both your strategic and tactical decision-making.
Free AccessThe Fed will be able to shrink its balance sheet through quantitative tightening to a trough of USD6 trillion from USD8.4 trillion today, with reserves reaching a minimum level of USD2.3 trillion, according to a Richmond Fed analysis published Wednesday.
"Just by allowing the securities to mature, it would take the Fed two to three years to reach a normalized size of its balance sheet," coauthors Huberto Ennis and Tre' McMillan wrote, estimating normalization will be done by late 2025 or early 2026.
The projections suggest the Fed can continue QT for longer and lower the amount of reserves in the system a touch lower than investors expect. The median expectation in the December 2022 Survey of Market Participants conducted by the New York Fed saw QT ending in the fourth quarter of 2024, with the central bank's balance sheet at USD6.25 trillion and reserves dipping to USD2.375 trillion.
Source: Richmond Fed
Why Subscribe to
MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.