New York Fed: Fed's balance sheet reduction may stop in 2025

On April 18, the New York Federal Reserve predicted that the Federal Reserve may stop shrinking its balance sheet in 2025. According to the two scenarios predicted by the New York Fed in its annual report, the Fed may end its balance sheet in mid-2025 or early 2025, and bank reserve balances will fall to about 2.50 trillion or 3 trillion dollars the following year. Federal Reserve officials began discussing slowing down their balance sheet at last month's policy meeting, but no decision was made at the meeting. Under the "more reserves" scenario described in the New York Fed report, the balance sheet size would shrink to about $6.50 trillion, while under the "less reserves" scenario, the balance sheet size would fall to $6 trillion. The Federal Reserve has been reducing its holdings of Treasuries and mortgage-backed securities by up to $95 billion a month. Wall Street strategists expect the Fed to reduce its monthly holdings of Treasuries from $60 billion to $30 billion, while maintaining the pace of mortgage-backed securities.