JP Morgan Expects Federal Reserve to Halt Quantitative Tightening Next Week
Two major U.S. banks forecast the Federal Reserve will halt its $6.6 trillion balance sheet reduction soon, citing mounting dollar funding costs amid next week’s rate decision.
Summary
JPMorgan and Bank of America project that the Federal Reserve will end its $6.6 trillion balance sheet reduction program this month, attributing the move to rising dollar funding costs. The Fed initiated quantitative tightening in June 2022 to reduce its balance sheet by allowing assets to mature without reinvestment or by selling securities. The decision could be confirmed at the Fed’s upcoming policy meeting, which will also determine the next interest rate action.
Terms & Concepts
- Quantitative Tightening: A monetary policy strategy where a central bank reduces its balance sheet by selling securities or allowing them to mature without reinvestment, aimed at decreasing liquidity in the financial system.
- Federal Reserve: The central bank of the United States, responsible for setting monetary policy, regulating banks, and maintaining financial stability.