Barclays: From a Risk Management perspective, the Federal Reserve should end balance sheet reduction ahead of schedule

On September 20th, Jinshi data reported that Barclays believes that the Fed has indicated that it can shrink its balance sheet while lowering interest rates, but due to risk management considerations, it is recommended to end the reduction prematurely. Barclays still expects the Fed to end quantitative tightening in December, and the Federal Open Market Committee (FOMC) will announce it in November. ‘In 2019, the scarcity of reserves has exacerbated the already tense situation in the repo market, leading to a significant rise in interest rates, causing serious disturbances in the US Treasury market,’ Barclays strategist Joseph Abate wrote in a report to clients. ‘We believe this exceeds the risk of maintaining reserves slightly above the necessary level.’