From Financial Modeling Prep: 2025-03-19 07:03:01

UBS analysts anticipate the Federal Reserve will ease the pace of its balance sheet drawdown at the upcoming policy meeting. Policymakers are considering tapering or pausing quantitative tightening (QT) due to concerns about market liquidity and government finances.

The Fed’s portfolio has shrunk from $9 trillion to $6.8 trillion since 2022. Cleveland Fed President Beth Hammack prefers continuing the drawdown amid fiscal negotiations. Temporary bond repurchases (repos) may inject liquidity back into the system, potentially delaying further tapering until May or June.

Slowing QT is crucial to safeguarding money markets and preserving the Fed’s control over interest rates amid fiscal uncertainties. The possibility of temporary repos showcases the Fed’s commitment to using various tools for managing liquidity during turbulent times.

With fiscal negotiations ongoing and market liquidity in question, the decision to pause or taper QT further may be postponed, potentially delaying significant changes until later in the year.

UBS’s analysis indicates the Fed may adjust its balance sheet runoff to balance liquidity withdrawal and risks of over-tightening. Monitoring these financial dynamics is crucial for investors and analysts. Utilizing tools like the Balance Sheet and Financial Growth APIs can offer valuable insights into these critical financial trends.



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