Fed flags end to balance sheet runoff, patience on rates

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Research staff presented options at the meeting for “substantially slowing” the runoff of the Fed’s balance sheet, “at some point over the latter half of this year.” The runoff is currently capped at $50 billion a month.

Bob Miller, Head of U.S. Multi-Sector Fixed Income at BlackRock Inc, said he is now expecting a balance sheet plan from the Fed by the May meeting minutes, a decision on the matter by June and a halt to the Fed’s runoff by October, if not July. This will help U.S. financial conditions and markets, he said. “The fact is that the Committee has spent three consecutive policy meetings discussing the balance sheet in detail, and to us that suggests some urgency in addressing the questions surrounding its future,” Miller said in a note.

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