Barclays: From a risk management perspective, the Fed should end tapering early
Barclays believes that the Federal Reserve has indicated that it can reduce interest rates while shrinking its balance sheet, but for risk management considerations, it is recommended to end tapering earlier. Barclays still expects the Fed to end quantitative tightening in December, with an announcement by the Federal Open Market Committee (FOMC) in November. ‘In 2019, reserve scarcity has exacerbated already tense conditions in the repo market, driving financing rates sharply higher and causing severe disruption to the U.S. Treasury market,’ Barclays strategist Joseph Abate wrote in a report to clients, ’which we believe exceeds the ability to maintain reserves at slightly higher levels than necessary poses a risk.’
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