Wrightson: Fed may end balance sheet shrinkage this week

Analysts at Wrightson, the research group, forecast that the Federal Reserve could be preparing to announce the end of its balance sheet reduction this week. Recent movements in the overnight lending market suggest that funding conditions have tightened and bank reserves have fallen to levels close to what is considered equilibrium. The Wrightson team said the Fed's move this week would be a prudent move to avoid putting too much pressure on money markets. "Even if the Fed believes that reserve supply remains reasonably abundant, we doubt that the FOMC will ignore the repeated warning signs in the federal funds rate in recent weeks," they said.