Investing.com -- The Federal Reserve cut interest cut last month, the first since 2020, pushing the central bank into monetary policy easing mode, but that didn't filter through its balance sheet runoff plans, which are expected to continue until Q2 2025, as the central bank's reserves remain abundant, JPMorgan said, citing the New York Fed's latest reserve demand elasticity measure.
"We think reserve demand elasticity should remain close to zero at least through this year and that the Fed can continue balance sheet reduction through Q2 2025," it added. San Francisco Fed President Mary Daly recently said that there are no indications suggesting a need to alter the current runoff strategy, which has reduced the balance sheet to $4.2T from from a peak of nearly $9 trillion seen at the start of 2020.The Fed's commitment to balance sheet reduction reflects a complex balancing act aimed at maintaining liquidity while supporting economic growth, which continues to hold up, supported by labor market strength.