Federal Reserve Expected to Halt Balance Sheet Reduction This Month

According to PANews, strategists from JPMorgan Chase and Bank of America anticipate that the Federal Reserve will cease its reduction of the approximately $6.6 trillion balance sheet this month. This process, aimed at withdrawing liquidity from financial markets, is expected to conclude earlier than initially planned. The banks have revised their forecasts due to the recent rise in borrowing costs in the U.S. dollar funding market. Previously, they had projected that the balance sheet reduction, which began in June 2022, would continue until December or early next year. The market widely expects Federal Reserve officials to decide on the future of the balance sheet during next week's interest rate decision. While a 25 basis point rate cut is considered highly likely, there is still disagreement on Wall Street regarding the timing of the end of quantitative tightening. Institutions such as TD Securities and Mizuho Securities have moved their predictions forward to October, whereas analysts from Barclays and Goldman Sachs believe the conclusion will occur later.