Goldman: bank liquidity needs will stall QE unwind
Economists at US bank expect Fed balance sheet to drop less than $1 trillion from 2017 peak
Liquidity constraints in the banking system could bring the US Federal Reserve’s balance sheet reduction effort to a premature end, according to economists at Goldman Sachs.
Last October, the Fed began gradually winding down its $4.5 trillion securities portfolio in a bid to ‘normalise’ monetary policy – a cut in assets that would require the liability side of the central bank’s balance sheet to shrink in tandem, including the $2 trillion in reserves that banks currently park at the Fed. The
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