Citi: The Fed is not afraid of a short-term surge in financing rates, and the balance sheet reduction will continue until next year

Golden Finance reported that Citi said the Federal Reserve may continue its plan to reduce its balance sheet until the second quarter of 2025, unless a recession occurs, which is longer than previously forecast. Since June 2022, the Fed has been gradually reducing its bond holdings through a process known as quantitative tightening (QT). The Fed said last week that it would slow the pace of its monthly sales of U.S. Treasuries, a move partly intended to ease potential pressure in the funding market. Citi previously expected that the Fed's measures to reduce the size of its balance sheet would continue until the end of 2024, which is largely in line with the expectations of other Wall Street strategists.