by Michael S. Derby
Sees no reason to change the current drawdown of the central bank's still-massive balance sheet.
When it comes to rate rises the central bank is probably "close to the end of the cycle.
A potential end to rate hikes has fueled a debate on whether the Fed should also consider winding down the process of allowing just shy of $100 billion per month in Treasury and mortgage bonds it owns to mature and not be replaced.
The Fed is trying to reduce the size of its holdings to withdraw the liquidity it added during the coronavirus pandemic crisis, which caused the size of Fed holdings to more than double to a peak of just shy of $9 trillion last summer.
Rapid decline in the Fed's reverse repo facility, which allows money market funds and others to park cash at the Fed.
This Fed tool is viewed as a proxy for excess and easy to remove liquidity and it has fallen rapidly over recent weeks. After an extended stay of over $2 trillion per day in inflows, it's been hovering just above $1 trillion in recent days.
The balance sheet run-off can run for an additional year and a half to two years.
Source: Reuters
https://finance.yahoo.com/news/feds-pow ... 33430.html
