Morgan Stanley: It is currently expected that the Federal Reserve will slow down its balance sheet reduction pace starting from June

On January 21st, Morgan Stanley economists stated that the Federal Reserve will announce its plan to slow down balance sheet reduction in May and begin implementation in June. Seth Carpenter and others from the bank wrote that they expect the Federal Reserve to "elaborately" discuss the issue of balance sheet reduction at the next three FOMC meetings, announce the scale and extent of slowing down balance sheet reduction in May, and start this process in June. Morgan Stanley previously predicted that the Federal Reserve would start slowing down balance sheet reduction as early as September last year. The bank still maintains its expectation for balance sheet reduction to end in February 2025. It is expected that by May or June, overnight reverse repurchase agreement usage by the Federal Reserve will decrease to $250 billion. (FXStreet)