JPMorgan and Bank of America warn in unison: Fed is about to stop tapering.

On October 24, strategists from JPMorgan and Bank of America expect that the Fed will stop reducing its balance sheet of about $6.6 trillion this month, marking the end of a liquidity withdrawal that has lasted more than two years. Both banks have brought forward their forecasts for the end of the Fed's quantitative tightening due to recent increases in borrowing costs in the dollar financing market. They had previously predicted that the balance sheet reduction, which began in June 2022, would end in December or early next year. “Current or higher levels of the money market should signal to the Fed that reserves are no longer 'ample',” wrote Bank of America's Mark Cabana and Katie Craig in a report on Thursday. They noted that high repo rates and financing pressures indicate that the system is gradually approaching a state of reserve scarcity. At JPMorgan, strategists led by Teresa Ho stated that the financing conditions this week prompted them to bring forward their forecast timing. As the Fed's reverse repo tool runs out of funds, the market has been “operating with more friction.” (Jin10)