Some FED members discussed whether it would be appropriate to pause or slow QT temporarily due to potential swings in reserves linked to debt ceiling dynamics
- Market expectations for the end of QT have shifted slightly later, to mid-2025, compared to prior expectations.
- The Fed is considering potential changes to the maturity composition of its balance sheet once QT ends, aiming to bring it closer in line with the maturity structure of outstanding Treasury debt.
- Fed noted that reserves remain abundant, but they could decline more rapidly than expected, requiring careful monitoring.
Reserves might decline quickly upon resolution of the debt limit and, at the current pace of balance sheet runoff, might potentially reach levels below those viewed by the Committee as appropriate
