Core Points - Federal Reserve Chairman Jerome Powell indicated that the long-term asset balance sheet reduction plan, known as Quantitative Tightening (QT), may be nearing its end [1][2] - Powell emphasized the importance of maintaining sufficient liquidity in the financial system to effectively control short-term interest rates and ensure normal market fluctuations [1] - Since mid-2022, the Federal Reserve has been reducing liquidity through QT to absorb the massive funds injected during the pandemic, with the balance sheet size decreasing from over $9 trillion to $6.6 trillion [1] Summary by Sections QT and Liquidity - Powell noted signs of tightening liquidity conditions, including rising repo rates and temporary market pressures on specific dates [1] - The Federal Reserve's balance sheet reduction has been a response to the large-scale asset purchases made during the pandemic to stabilize the market [1] Future of QT - The ultimate target size for the balance sheet reduction has not been specified, but Powell stated that the current ample reserve system has proven effective for monetary policy and financial stability [2] - Some officials believe that there is still sufficient liquidity in the financial system, suggesting that QT can continue without disrupting the money market [1][2] Flexibility and Caution - Powell mentioned that experiences since 2020 indicate that the Federal Reserve can be more flexible in using balance sheet tools in the future [3] - The aim is to avoid a repeat of the market pressures experienced during the last QT phase in 2019, which forced the Fed to restart asset purchases [3] Economic Outlook - Powell did not dismiss market expectations for a potential interest rate cut at the upcoming meeting, although he did not explicitly endorse this view [3] - He indicated that economic activity might be "more robust than expected" based on data available before the government shutdown [3]