Fed to end rate-hike cycle early - analysts

Fed to end rate-hike cycle early - analysts

Mubasher: The US Federal Reserve (Fed) is expected to announce a reduction of bonds it owns by the next year or early 2020, signalling an early end of its rate-hike cycle.

The Fed could also announce a quarter-point hike in interest rate and 0.2% in interest on excess reserves, according to CNBC.

The Fed could be reducing its balance sheet from a peak of $4.5 trillion to $3.5 trillion, analysts suggested, yet this depends on the extent to which the financial markets are tightening.

The sooner balance sheet runoff comes to an end, the earlier the rate hikes wrap up.

Meanwhile, the interest hikes are expected to come at an “unhurried” pace, Ellen Zentner told MarketWatch.

Given that “the data since March is pretty much in line with the outlook and the rate path clearly remains a gradual one,” the Fed is not at the point to be concerned over the rise of inflation, she added.

"There is a very active debate, and it's probably really going to take hold at the August meeting, about how far the balance sheet contraction should really go," research service Wrightson ICAP chief economist Lou Crandall told CNBC, noting that this indicates “fewer truly surplus reserves in the system than we might have thought."

Meanwhile, the forthcoming Fed deliberations would provide investors insight into how the US central bank would end the financial stimulus, and eventually how the market would react.