"Fed megaphone": Fed officials consider slowing or pausing balance sheet reduction

Odaily reports that "Fed mouthpiece" Nick Timiraos said the minutes of the Fed's January meeting showed that officials discussed whether to slow or pause the $6.8 trillion reduction of their asset portfolio at last month's meeting, and they face complex issues in the coming months due to raising the federal debt ceiling. Dynamics related to the debt ceiling may lead to significant fluctuations in the Fed's liabilities. The balance sheet reduction process will eventually deplete the banking system's reserves, but Fed officials are uncertain how long this process will last. The Treasury's management of its cash balances may complicate the Fed's ability to determine the appropriate reserve balance. Therefore, according to the minutes released on Wednesday, officials at the January meeting believed that "it may be appropriate to consider pausing or slowing the reduction of the balance sheet until the debt ceiling issue is resolved". (Jinshi)