Fed Portfolio Unwind Gains Urgency as Markets Flash Warnings

Core Insights - The Federal Reserve is facing pressure to halt the reduction of its $6.6 trillion portfolio of securities as money markets signal that quantitative tightening may have reached its limits [1][2] - Over $2 trillion has exited the financial system since the Fed began reducing its portfolio in June 2022, leading to a significant depletion of liquidity [3] - Interest rates among banks have risen, and the Fed's benchmark rate has also increased for the first time in two years, indicating tightening liquidity conditions [4] Group 1 - The upcoming Federal Reserve meeting on October 28-29 is expected to address the future of the Fed's securities portfolio, with indications that the process could end soon [5] - Wall Street strategists warn that the Fed must act quickly to prevent market distortions similar to those experienced in September 2019, when short-term rates surged due to tightening measures [6] - Major banks, including Bank of America and Deutsche Bank, have adjusted their expectations, now anticipating an end to quantitative tightening at the October meeting [7]