Wall Street expects the Federal Reserve to end its balance sheet reduction this year, but the likelihood of a sudden stop is low

The Federal Reserve is nearing the end of balance sheet reduction, but the actual closing date depends on the pace of interest rate cuts and market financing pressures. Policymakers have hinted at completing the reduction of U.S. debt holdings by the end of the year, with many on Wall Street believing that quantitative tightening (QT) is unlikely to end abruptly. However, recent weak economic data and liquidity pressure risks have cast uncertainty over the outlook. "If the Federal Reserve intends to stimulate the economy, it may stop reducing the balance sheet," said Bank of America strategists Mark Cabana and Katie Craig. "If the Federal Reserve's goal is to normalize monetary policy, then balance sheet reduction can continue."