The timing of the interest rate cut is unknown, but the Federal Reserve's end of balance sheet reduction is getting closer.

After the release of the heavyweight minutes of the December meeting by the Federal Reserve, renowned financial journalist Nick Timiraos, also known as the "New Fed News Agency," wrote that the minutes suggested that rate hikes have come to an end, but no timetable for rate cuts was provided. Although the timing of rate cuts is still unknown, market participants expect that the Federal Reserve is nearing the end of quantitative tightening (QT). According to the latest minutes of the December meeting, participants noted that, according to the Fed's plan, once the level of bank reserves is slightly above what is considered sufficient, the pace of balance sheet reduction will slow down and then stop. Some media analysis suggests that the Federal Reserve is trying to find the right time to consider how to exit balance sheet reduction, which implies that the reduction may end earlier than previously expected. Currently, the level of bank reserves on the Federal Reserve's balance sheet is still around $3.48 trillion, much higher than the level when the reduction began in 2022. However, many market participants are still concerned that the scale of reserves may not be as abundant as Fed policymakers believe. In 2019, Fed officials were "taught a lesson" when overnight market rates surged fourfold to 10%, forcing the Fed to take emergency measures. According to Gennadiy Goldberg, Director of U.S. Rate Strategy at TD Securities, as quoted by the media: "The Fed is like a scout, always wanting to be prepared. On the one hand, it's good to prepare in advance for the end of QT. On the other hand, they also have to figure out how to do this without signaling to the market that the end of QT is imminent." Currently, many market participants expect the Federal Reserve to exit its balance sheet reduction policy in the second or third quarter of this year.