Starting in April, the Fed will slow down the pace of balance sheet reduction from $25 billion/month to $5 billion/month. 

The Fed is actually signaling a soft transition to a more neutral policy.

Easing QT will help stabilize the debt market. And on the agenda is refinancing the US debt, by $9 trillion. 

The Fed is trying to avoid a recession by allowing the economy to adapt to the new conditions of the “trade war”.

Overall, the markets took a little breather yesterday on this news.

Slowing down QT is a smart move that balances the fight against inflation and supporting economic growth. This could also be the first signal to lower rates in the coming months.

Smaller QT ➡️ more liquidity ➡️ more favorable conditions for future rate cuts.