US Rates: Slowly but Surely, Pushing Back the QT Taper Timeline

• The Federal Reserve was expected to announce tapering of quantitative tightening (QT) in March and implement it in April, but recent minutes suggest a more relaxed approach with no urgency to start the process soon.
• SOFR rates have trended lower in January, easing concerns over upward pressure, and there is plenty of liquidity in the marketplace, with significant RRP and reserve balances.
• Forecasting for the Fed's balance sheet evolution suggests a less volatile TGA balance and a shift in the relationship between t-bill issuance and RRP balances, leading to a more stable scenario for reserves in the near term.

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