Bank of America expects the Federal Reserve to end its balance sheet reduction this month

Bank of America strategists stated in a report on Thursday that due to the recent high interest rates in the repurchase agreement market, they now expect the Federal Reserve to stop shrinking its balance sheet at the end of October instead of December. The report marks a change from their earlier expressed view in research earlier this week that the balance sheet reduction would end in December. Strategists Mark Cabana and Katie Craig noted in the October 20 report that the risk of the Federal Reserve ending its quantitative tightening policy in October and subsequently making large-scale purchases of Treasury bills is increasing, due to a shift in cash/collateral in the financing market last week. Prior to this, Bank of America had expected quantitative tightening to end by the end of the year since March 2025