Here's What The Fed's Quantitative Tightening Will Look Like BY TYLER DURDEN As we noted last night, the December FOMC meeting minutes included a lengthy discussion of the timing and speed of Fed balance sheet shrinkage (quantitative tightening or "QT"), an unexpected twist which sent risk assets and Treasurys tumbling. The broad message appears to be that QT will start sooner than it did in the previous tightening cycle, and proceed at a faster pace although as the Fed's Bullard (who is a voting member this year) observed, the runoff could be passive, i.e., not involve actual selling but merely be the result of maturing securities held by the Fed. In any case, in a note from BofA economist Aditya Bhave, he argues that the Fed’s balance sheet policy will remain accommodative for the next several quarters for several reasons: The Fed has more than doubled its balance sheet during the pandemic. Therefore it will have to reinvest a larger quantity of maturing Treasuries even while it is shrinking its balance sheet. BofA expects QT to start in 4Q 2022, but the stance of Fed balance sheet policy will remain more accommodative than it was before the pandemic through end-2023. With regard to point two, a frustrated Steve Liesman pointed out yesterday that what the Fed is doing is a "historic absurdity" and noted that "the fed is talking about aggressively reducing its balance sheet while at the same time adding assets to that balance sheet. I think that's the monetary policy equivalent of a dog chasing its tail." [Read More](https://www.zerohedge.com/markets/heres-what-feds-quantitative-tightening-will-look)