Citigroup strategist: If Powell takes over the Fed, shrinking the balance sheet will face many challenges.

The strategist of Citigroup Group stated that the nominee for Federal Reserve Chairman, Kevin Wash, may adopt a gradual approach to reduce the Federal Reserve's balance sheet in order to avoid causing another turmoil in the currency market. Previously, due to the expansion of the US government's debt issuance and the Federal Reserve's continued withdrawal of funds from the currency market by reducing its balance sheet, it caused market liquidity tension. The Federal Reserve subsequently suspended its balance sheet reduction operations and began purchasing short-term Treasury securities to provide reserves to the financial system. The strategist of the institution pointed out that if Wash leads the Federal Reserve, he can reduce the size of the balance sheet in various ways, including shortening the weighted average maturity of held assets, slowing down the pace of purchasing short-term Treasury securities, or letting the held mortgage-backed securities naturally mature and not renewing the purchases.