Qatar – Fed pivot raises question: When does QT start?

Qatar – Fed pivot raises question: When does QT start?

The Federal Reserve building in Washington. The move to a faster reduction in new bond purchases from $120bn a month to zero had been well telegraphed, as had the new forecasts from policymakers that have now convinced the market that the first interest rate increase will arrive no later than May, with more to follow by year-end. Investors are asking a key question after the US Federal Reserve accelerated its taper of bond purchases and unveiled more aggressive rate hike projections: When could the central bank eventually start to shrink its massive balance sheet? Bond investors had largely absorbed the Fed's pivot to a more inflation-hawkish stance. The move to a faster reduction in new bond purchases from $120bn a month to zero had been well telegraphed, as had the new forecasts from policymakers that have now convinced the market that the first interest rate increase will arrive no later than May, with more to follow by year-end. But one question remaining is when the Fed might move from tapering purchases of bonds to shrinking the central bank's balance sheet. After its 2014 taper, the Fed held its balance sheet in essentially a steady state for about three years and