Fed likely to end quantitative tightening this month: Analysts

Analysts at JPMorgan and Bank of America expect the US Federal Reserve to end its balance sheet reduction program—valued at around $6.6 trillion—by the end of October, marking a halt to a policy aimed at withdrawing liquidity from financial markets.

Both banks revised their previous forecasts, which had anticipated the end of quantitative tightening (QT) in December or early next year. The change comes amid rising dollar funding costs in money markets, prompting analysts to expect an earlier conclusion.

The QT program, launched in June 2022, involves reducing the Fed’s holdings of US Treasuries and mortgage-backed securities.

Policymakers are expected to discuss the program’s future at their meeting next week, alongside projections for a 25-basis-point rate cut, bringing the target range to 3.75%–4%.

Although a rate cut now appears almost certain, markets remain divided over the timing of the QT program’s end — one of the Fed’s indirect tools for steering interest rates.

Fed Chair Jerome Powell said earlier this month that the central bank would stop reducing its balance sheet once bank reserves are slightly above the level policymakers deem sufficient to ensure ample market liquidity