Credit Agricole CIB Research comments on today’s FOMC minutes from the May-3rd meeting.
1- As the economic expansion continues, the FOMC believes that the policy accommodation arising from its large balance sheet should be gradually removed.
2- We look for the Fed to shrink its balance sheet, possibly beginning in December with the aim of reducing it over time by about USD2.5trn.
3– We look for a modest, controlled pace of reducing reinvestment amounts in order to avoid disrupting markets and to smooth out the reinvestment process. That could be consistent with a reduction of USD200-250bn in 2018, say, USD20bn a month split equally between MBS and Treasuries.
Source: Credit Agricole CIB Research
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