NextFin news, Bank of America (BofA), JPMorgan Chase, and Evercore have publicly forecasted that the Federal Reserve will soon halt its multi-year balance sheet runoff program, a key mechanism behind quantitative tightening (QT), as early as October 2025. This prediction was reported on October 23, 2025, based on recent financial market signals observed in the United States. The central bank's balance sheet, which holds approximately $6.6 trillion in Treasury securities and mortgage-backed securities, has been systematically reduced since its QT commencement in June 2022.
This prospective policy pivot is primarily due to increased funding market frictions, notably elevated borrowing costs in dollar funding markets and historically low reverse repurchase agreement (reverse repo) balances, alongside reserve shortages in the banking system. These elements collectively indicate tightening liquidity conditions that could hamper economic growth and financial stability. The Federal Reserve's decision to cease the runoff would stabilize or possibly increase the reserves that banks hold, easing liquidity constraints.
The timeline for this cessation has been accelerated compared to earlier market expectations. JPMorgan and BofA had initially forecasted an end of QT in December 2025 or early 2026, but now expect the process to conclude sooner, reflecting a reassessment of conditions in the funding markets. Evercore also aligns with this view, highlighting similar liquidity signals. The Federal Reserve's expected move coincides with market speculation about an imminent 25 basis point interest rate cut, aiming to alleviate the effects of tighter financial conditions.
This policy recalibration occurs amid the current administration of President Donald Trump, who was inaugurated on January 20, 2025. The Fed's approach underpins the complex balance between controlling inflation—previously elevated post-pandemic—and supporting sustainable economic expansion. The central bank’s decision-making is increasingly data-dependent amid ongoing geopolitical and economic uncertainties.
Analyzing the causes reveals that the years-long QT and rate hikes have led to tighter liquidity, especially evident in the elevated cost of short-term dollar funding and lower reserve levels that threaten smooth market functioning. The Fed's balance sheet runoff removes excess reserves by shrinking its holdings as bonds mature without reinvestment, thus draining liquidity.
However, the resultant market stress, underscored by funding rate spikes and lower reverse repo usage—a barometer of available liquidity—has prompted market strategists at BofA and JPMorgan to rethink timing. The near end of runoff reflects concern over exacerbating liquidity shortages that could trigger funding strains, asset price volatility, and slower credit growth.
This anticipated halt will likely have profound impacts on markets and monetary policy trajectories. Ceasing QT will stabilize or expand reserve levels, alleviating liquidity pressures, and potentially cushioning short-term interest rates. This liquidity support can help ensure smoother functioning of financial markets and prevent a tightening credit environment that risks slowing economic growth.
Moreover, combined with the expected Fed rate cut, the move signals a more accommodative monetary stance. Such a stance may support continued recovery in credit markets and broader economic activity while maintaining inflation control through calibrated rate adjustments.
Looking forward, this policy inflection suggests the Federal Reserve is shifting from active quantitative tightening toward a pause and possible balance sheet normalization period. This trend reflects a broader global central banking challenge of withdrawing pandemic-era stimulus without destabilizing markets or growth.
For investors and financial institutions, this signals a potential downward pressure on money market rates and improved liquidity conditions, which may favor risk assets and reduce volatility in short-term funding markets. The Fed's balance sheet is likely to plateau at this stabilized level for some time given ongoing economic uncertainties, providing a foundation for more predictable monetary policy settings.
In summary, according to BofA, JPMorgan, and Evercore, the Federal Reserve is expected to imminently announce an end to its balance sheet runoff program as early as October 2025, driven by liquidity stresses and market dynamics. This represents a pivotal shift in U.S. monetary policy under President Donald Trump's administration towards easing financial conditions while cautiously managing inflation risks.
According to Seeking Alpha, this forecast is supported by real-time data observed in funding markets, reserve levels, and reverse repo activity. These market-based indicators provide objective evidence for the Fed’s likely conclusion of quantitative tightening, aligning with a narrowly focused strategy to sustain financial stability and economic growth in a complex macroeconomic environment.
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