UBS On-Air: Paul Donovan Daily Audio 'US policy changes'

The Federal Reserve announced a slower pace of shrinking its balance sheet. Context is important here—quantitative policy is about the balance between the supply of and demand for liquidity. Demand for liquidity was slowing significantly after the pandemic, requiring the Fed to shrink its balance sheet to match. Liquidity demand is now slowing less, so the Fed’s balance sheet can shrink more slowly.