FED: QT Pause/Taper Announcement Possible Today

Analyst expectations for Fed balance sheet runoff have been reassessed since the January FOMC minutes pointed to a pause/taper/end to QT soon. A shift looks increasingly likely by the May meeting, and we will be watching for this in our Instant Answers to see if it is announced as early as today. 

• A couple of analysts expect the Fed to announce a pause at this meeting, and expectations appear to be mounting at the last minute after a WSJ article this morning pointed highlighted that "Fed Considers Tweaking Its Portfolio Runoff".
• We go through the considerations and QT expectations in more detail in our latest Fed Balance Sheet Tracker – link here.

Analysts' views are mixed though overall those coming into Fed week expecting a change today are in the minority:

• BofA sees a QT pause announced today; with runoff restarting later this year after the debt ceiling addressed.
• Deutsche sees an announcement today as well: “pause in QT beginning in April, and we expect forward guidance indicating that QT is expected to resume once the debt ceiling is resolved and the liability composition of the balance sheet normalizes. There are risks that a slowing is announced rather than a pause.”
• In the camp of "no balance sheet announcement": Barclays (decision on QT until the May or June meetings, though there are risks that runoff could be halted in March/May/June), Goldman (expect Treasury runoff to stop in May, but MBS runoff to continue until end-Q3), Morgan Stanley ("expect the Fed to engage in meaningful discussions around balance sheet runoff "), Nomura (no announcement at this meeting, QT to end after June), TD (QT in place until September), Wells Fargo ("End of QT announced in May, starting June 1"), Citi (acknowledge risks of a pause/slowdown in QT in March/May),
• As suggested above, multiple analysts see risk of a QT shift this week though not a base case- some of the more emphatic include Natixis (“a slowing or ending of QT could occur at this meeting or perhaps in May") and UBS (“Some risk” of a taper).
• Some analysts only see QT ending well into 2026: Wrightson ICAP Chief Economist Lou Crandall told MNI there is "no indication whatsoever" that reserve balances are approaching a point where the Fed's QT program needs to stop. The Fed's "long-run strategy has not changed" and the QT program will continue "potentially well into 2026." (see our Policy Team article - “MNI INTERVIEW: Fed QT Has Room To Run Well Into 2026-Crandall). Though Wrightson ICAP note in their Fed meeting preview that they are uncertain whether there will be an announcement as soon as today. "By slowing the pace of QT out of an abundance of caution now, the FOMC would probably just create a need for more QT later to finish the job.'