Overview

• Market participants now expect the Fed’s balance sheet runoff to conclude in February at $6.2 trillion, per June meeting minutes.
• The Fed paused QT in April to limit market disruptions while debt ceiling negotiations unfolded.
• Respondents forecast reserve balances sliding to about $2.9 trillion and reverse repo usage easing to low levels under the extended drawdown.
• Governor Waller outlined a hypothetical long-term balance sheet of $5.8 trillion, with $2.7 trillion in reserves and $780 billion in the Treasury’s account.
• He also flagged a move toward shorter-dated securities to adjust portfolio composition after QT ends.