The shadow of the debt ceiling looms as the Federal Reserve reduces its balance sheet, "slamming the brakes"?

According to the Zhitong Finance APP, after the release of the January policy meeting minutes last week, market expectations regarding the Federal Reserve's balance sheet reduction process have diverged. The minutes indicated that policymakers believe it may be appropriate to pause or slow down the reduction of the balance sheet until the U.S. federal government's debt ceiling issue is resolved. It is understood that in January of this year, the U.S. government's outstanding debt reached the statutory limit, after which the U.S. Treasury has been taking so-called "extraordinary measures" to continue issuing most bonds normally. The conditions in the money market may remain unstable for a period, increasing the risk of the Federal Reserve excessively withdrawing liquidity, which is precisely what Fed officials do not want to see, and it opens the door for a shift in the quantitative tightening process. Analysts at Wrightson ICAP stated, "We believe the Federal Open Market Committee (FOMC) will tend to 'slow down' the overall pace of reduction rather than completely stop the balance sheet reduction." Barclays analysts maintain that quantitative tightening will end in September or October, noting that "pausing quantitative tightening at the March or May meetings may not make sense, as it could just be a brief restart followed by an end to asset reduction in September or October." They stated, "We believe the concerns expressed in the January FOMC meeting minutes may not be about bank reserve levels, but rather about the speed of reserve decline during the period from August to October." Analysts at research firm LH Meyer stated, "If not restarted, pausing the balance sheet reduction could turn into a complete stop. Restarting the balance sheet reduction could be tricky, especially if the debt ceiling event undermines confidence in market operations." They indicated that this means quantitative tightening will slow down during the resolution of the debt ceiling issue. The Federal Reserve is still reducing its bond holdings. Federal Reserve officials have previously expressed concerns that the U.S. federal government's management of finances will make it difficult for the Fed to obtain clear market signals regarding whether liquidity is sufficient. The Fed slowed the pace of liquidity reduction last year to ensure a gradual approach to the final stage. The Fed has been trying to determine how far the quantitative tightening policy can be implemented without causing excessive volatility in the money market or undermining its control over the federal funds rate. The federal funds rate is the Fed's primary monetary policy tool. Fed officials recently pointed out that they still have room to continue implementing, and the latest market liquidity situation shows no need to stop quantitative tightening. A survey conducted before last month's policy meeting among major banks and fund managers indicated that respondents expect quantitative tightening to stop in June or July, at which point the size of assets held by the Fed will decrease from a peak of about $9 trillion in 2022 to $6.4 trillion, currently around $6.8 trillion. It is expected that by the end of quantitative tightening, reserves will decrease from the current $3.3 trillion to $3.125 trillion, while the size of the Fed's reverse repurchase tool is estimated to be $125 billion. The reverse repurchase tool is an indicator of excess liquidity. However, throughout February, the size of the reverse repurchase tool has remained below $100 billion