The central bank could end the reduction of its balance sheet ahead of schedule, a move that would add further monetary stimulus to the U.S. economy.
The central bank could end the reduction of its balance sheet ahead of schedule, according to strategists from Ned Davis Research and Goldman Sachs.Ending the process ahead of schedule would keep monetary conditions looser as more liquidity would remain in the system.
The central bank could end the reduction of its balance sheet ahead of schedule, a move that would add further monetary stimulus to the U.S. economy, according to strategists from Ned Davis Research and Goldman Sachs. Earlier this year, the Fed indicated it would end its balance-sheet reduction process by September.
"It would be harder for the Fed to explain why they were cutting rates and letting the balance sheet continue to run-off," said Joseph Kalish, chief global macro strategist at Ned Davis Research, in a note. "That would be like pressing on the gas and the brakes at the same time." In October 2017, the central bank began to run off those assets on a monthly basis as it appeared the economy was on better footing. That process has been referred to by experts, and President Donald Trump, as "quantitative tightening." The Fed also hiked rates four times in 2018.
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