The balance sheet will continue to shrink, said the newest members of the Fed/More on the US consumer

With the Fed done raising interest rates (though they won't say so of course), especially now with the labor market showing cracks in its foundation, and the market pricing in rate cuts mid next year, there is still monetary tightening going via QT and will continue to be the case at least for the next few quarters. There is some political pressure too with regards to the Fed's balance sheet. Back on September 18th, Florida Senator Rick Scott penned a letter to the newly appointed Fed members asking them four questions, two of which referred to the balance sheet. "Will you commit to right-sizing the Federal Reserve's balance sheet and, at minimum, meeting the asset reduction goals put forth by the Committee in January 2022?" And, "Will you commit to reigning in interventionist long-term purchases by the Federal Reserve which only serve to distort markets and misallocate capital resources?" https://www.rickscott.senate.gov/2023/9/sen-rick-scott-pushes-for-accountability-from-new-federal-reserve-appointees

Well, new Fed members Vice Chair Philip Jefferson, Lisa Cook and Adriana Kugler wrote back yesterday. In defining where the balance sheet size will end up, "The size of our balance sheet ultimately will depend on the public's demand for our liabilities, particularly currency and reserves and we cannot specify in advance what that demand will be, hence we are not targeting any particular dollar value for our balance sheet." In other words, he basically said what Powell said at his presser a few FOMC meetings ago, 'we'll know it when we see it' in terms of right size. 

But because that right size is smaller than it is now, "Under plausible assumptions the size of the balance sheet could decline considerably further before reserves reach the level consistent with the ample reserves operating framework." Right now those bank reserves balance total $3.39 trillion and some speculate $2.5 trillion is the needed amount, thus we have maybe about 9 more months of QT at least, totaling $900 billion of liquidity to leave the financial system. I say 'at least' because the Fed's Reserve Repo Program is shrinking too and has $900 billion left in it. Those bank reserves by the way stood at $1.6 trillion in February 2020 and were at just $12 billion, yes $12 billion, right before Ben Bernanke got drunk with the printing press in 2007.