FOMC: Balance sheet announcement likely in September – HSBC

The FOMC left policy unchanged, as expected, at its policy meeting yesterday, but the Committee did, however, signal that the Fed will soon begin a program to disinvest some of the Treasury and mortgage-backed securities on the Fed’s balance sheet, notes Kevin Logan, Chief US Economist at HSBC.

Key Quotes

“We expect the FOMC to announce a disinvestment program at its next policy meeting in September and to commence the program in October. The Committee repeated that inflation “on a 12-month basis” is expected to remain below 2.0% in the near-term, but should stabilize “around” the Committee’s 2.0% objective in the medium term. The anticipation of an eventual rise in inflation should keep the FOMC on a gradual tightening path, in our view. We expect the next 25bp hike in the federal funds rate to come in December.”