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Fed’s balance sheet plans may need to change

The Fed’s preference is to stick to the balance sheet normalisation plan it drew up last year, but we think a sharp economic slowdown will prompt the Fed to halt its balance sheet run-off in 2020. In the meantime, upward pressure on money market rates may require the Fed to make further “technical adjustments” to keep the effective fed funds rate near the mid-point of its target range.

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