U.S. Outlook: Fed balance sheet reduction is right around the corner

Scott Anderson
Chief Economist

The summer is just flying by, and that means another FOMC rate decision and statement next week.

Graph showing trends as a result of Fed balance sheet reductionThe market focus will be on the FOMC statement and any additional clues surrounding the timing of the Fed’s balance sheet adjustment policy.

For more on this, see highlights of my report below, followed by a link to the full U.S. Outlook, delivered on July 21.

Key observations:

  • There is a small, though unlikely, chance the FOMC could announce the balance sheet reduction at next week’s meeting.
  • We expect the Fed to ultimately reduce its balance sheet by around $2-2.5 trillion.
  • As the Fed shrinks its balance sheet, it could be good news for savers who have been earning very little interest in their bank deposits.
  • Only one more quarter-point rate hike for 2018 and another in 2019 are fully priced into the market today.

 

Click here to read my full report.

 

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