Fed Balance Sheet Reduction and New Rate Forecasts

• Monetary policy (MP) is still stimulating the economy
• Financial conditions remain accommodative
• Earlier rate hikes reduce risks to the economy

Former Federal Reserve Governor Christopher Waller stated that a rapid interest rate hike is necessary to restore price stability. He emphasized that inflation remains too high and is unlikely to decrease without additional regulatory measures.

Federal Reserve Chairman James Barkin noted that the direction of the regulator's policy is clear, with the main question concerning the pace of rate changes. The investment boom in artificial intelligence is intensifying demand-side inflationary pressure; however, the Fed is capable of counteracting this influence.

The balance sheet of the US Federal Reserve System decreased by $7.969 billion in one week. Market participants expect a key rate hike of 25 basis points to the level of 4.00–4.25% in December and a pause in January.