If you’re looking for a wild card for this week’s Federal Reserve meeting, forget about interest rates and focus on the balance sheet. The outflow of the Fed’s $7.6 trillion in Treasuries, mortgage-backed securities (MBS) and other assets may soon taper and eventually come to a halt. At his post-meeting press conference on Wednesday, Fed Chair Jerome Powell may provide some hints about how the process will unfold. At the last Fed meeting in late January, Powell indicated that the topic would be addressed at this meeting. With few interest rate surprises in store, the central bank’s balance sheet approach could spark some intrigue. The focus will be on when tapering will begin and how quickly the Fed will move to ease what is colloquially known as “quantitative tightening,” or QT. The Fed currently allows up to $60 billion a month in Treasuries to be wiped off its balance sheet without being reinvested, along with up to $35 billion in MBS, a level that almost never comes into play. Mark Zandi, chief economist at Moody’s Analytics, predicts that “QT will end starting in June with the first rate cut, and they’ll kind of roll it back so it ends in early 2025, at which point they’ll do it.” have $7 trillion in assets.” In terms of timetable, this is exactly the unofficial consensus on Wall Street. Both Bank of America and Goldman Sachs expect the process to begin earlier, in May, and then continue into the first quarter of 2025. The idea is that the monetary regime will shift from one of large bank reserves to something less.Both firms see the level of Treasury roll-offs reduced to $30 billion a month, with Goldman putting the end point of the process when the balance sheet will be down to $6.7 trillion.The move coincides with lower demand for the Fed’s overnight reverse repo facility, an integral liquidity measure as banks maneuvered through the Covid-era economy. Demand for the so-called ON RRP peaked at more than $2.5 trillion in late 2022 and has now fallen to $447 billion this week. “The risks to our base case are inclined towards a later QT slowing and a longer QT period. We overweight Dallas Fed President Logan’s guidance that the Fed would slow QT when ON RRP balances reach a ‘low level,'” wrote BofA rates strategist Mark Cabana. “If the Fed signals a later QT slowdown than we expect, this will contribute modest upward pressure on money market rates and result in a higher supply of banknotes than in our base case.” While there is no guarantee that the Fed reveals its budget plans, Powell will almost certainly face questions in his post-meeting press conference.Before the Fed began QT in June 2022, Powell took the unusual step of advising the public and media to read the minutes from the previous meeting for information on how the trial would be conducted. Zandi said he expects Powell might take the same approach this time.