Stock market today: S&P 500 falls as government shutdown, trade jitters persist
Investing.com -- Federal Reserve Chair Jerome Powell indicated on Tuesday that the central bank’s balance sheet reduction program, known as quantitative tightening (QT), could be winding down soon.
Speaking at a National Association for Business Economics event in Philadelphia, Powell said the Fed "may approach that point in coming months" when it will stop shrinking its balance sheet holdings.
The Fed chair pointed to emerging signs of gradually tightening liquidity conditions in financial markets, including "a general firming of repo rates along with more noticeable but temporary pressures on selected dates."
Powell emphasized that the central bank’s plan is to "stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions."
The Fed is taking a "deliberately cautious approach" to avoid repeating the money market strains experienced in September 2019, Powell noted. He added that the central bank’s implementation framework, including the standing repo facility and discount window, will help "contain funding pressures and keep the federal funds rate within our target range" during the transition to lower reserve levels.
The Federal Reserve has been reducing its balance sheet since 2022 as part of its broader monetary tightening campaign to combat inflation.