The US Federal Reserve is likely to take a decision on how to reduce the balance sheet accommodation in 2017. Minneapolis Fed President Neel Kashkari who was the only dissenter at the March FOMC meeting said that he wants to look at the Fed’s plan in reducing its $4.5 trillion balance sheet as soon as possible. He added that there are no reasons to hold such a huge balance sheet and there are plenty of plans to choose from on how the reductions could be done. Cleveland Fed President Loretta Mester said that she favors reducing the balance sheet beginning as early as this year.

Speaking to the Reuters in an interview, San-Francisco Fed President John Williams said that he would want to let the Fed’s $4.5 trillion balance sheet start shrinking later in the year. We at FxWirePro originally expected and forecasted a decision on balance sheet last year but it looks like that our balance sheet forecast is going to come true for 2017. As the voice to reduce balance sheet grows within the Fed, we expect the central bank to reveal its plans by the end of the year.

We expect the fed to initially adapt a stop reinvestment plan rather than sell assets plan as the inflation is not overbearingly concerning.