If the Fed does decide to call time on its quantitative tightening (QT) this week it will be responding to the Treasury’s efforts to rebuild its cash reserves after the debt ceiling was raised this summer, which has triggered a more marked decline in reserve balances. The Fed had already slowed the pace of its balance sheet run-off to a crawl in April, however, so the bigger question is whether it not only stops the contraction, but goes further and announces a plan to begin a gradual expansion again to keep pace with nominal GDP growth?
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