Fed's in no hurry to reduce the balance sheet - BBH

Analysts at Brown Brothers Harriman explained that the Fed's leadership does not appear to be an in a particular hurry to reduce the balance sheet. 

Key Quotes:

"It is clear that the first step will be more interest rate increases.  

It is not clear when the normalization process is well under way, but we suspect that later this year when the Fed funds target range is above 1% that the next step is possible.  

The next step is not the reduction of the balance sheet through sales of assets, but rather refraining from recycling principal payments and maturing issues in full.  

Officials will want some control over the process.    

There are over $200 bln of Treasuries in the Fed's hands that mature this year.  Next year's maturities are more than twice a large.  

We also know that in the long-run the Fed prefer to have only Treasuries on its balance sheet."