Federal Reserve's Balance Sheet Reduction Nears Completion, Says Former New York Fed President

According to Odaily, former New York Federal Reserve President Bill Dudley has stated that the Federal Reserve's balance sheet reduction, known as quantitative tightening (QT), is nearing its target and will soon come to a halt. Dudley highlighted the operational challenges and significant risks associated with further reductions, noting that the benefits are minimal. He emphasized that additional reductions would not facilitate a substantial decrease in short-term interest rates and would have little impact on the overall stance of monetary policy. The Federal Reserve's balance sheet has decreased from its peak of $8.97 trillion in April 2022 to $6.56 trillion. This reduction follows the Fed's previous purchases of large amounts of U.S. Treasury bonds and agency mortgage-backed securities to support the economy during the COVID-19 pandemic. The recent sales of these assets have contributed to a more balanced supply and demand for reserves.