- Market confidence in an early QT end surged to 100% on Polymarket, signaling a shift toward a more accommodative Fed policy.
- Traders expect the Fed to halt QT before May, with Wall Street analysts eyeing a slowdown or pause at the upcoming FOMC meeting.
- Treasury cash management and debt ceiling concerns add uncertainty, influencing Fed policy decisions on liquidity and balance sheet strategy.
As per analyst Axel, the probability of the Federal Reserve ending Quantitative Tightening (QT) before May has surged to 100% on Polymarket. The anticipation of an early QT pause indicates a possible shift toward a more accommodating monetary policy. As a result, government bond yields may drop while stocks and Bitcoin may gain traction. The U.S. dollar may also depreciate.
Polymarket Data Reflects Major Sentiment Shift
Market predictions indicate an overwhelming belief that the Fed will halt QT before May. The probability remained volatile from March 5 to March 9, showing small fluctuations. However, around March 11, the probability spiked sharply. This brief increase was followed by a minor dip, yet the overall trend remained upward.
By March 13, the probability crossed 60%, accelerating rapidly. Between March 13 and March 15, a dramatic surge pushed the probability above 80%, nearing certainty. It eventually stabilized at 100%, reflecting a strong consensus among traders.
Additionally, Polymarket’s total trading volume on this event has reached $6.25 million. The high volume highlights market interest. These trends suggest traders expect the Fed to act soon to adjust its balance sheet policy.
Wall Street Eyes Possible QT Slowdown
Wall Street analysts and major financial institutions are closely watching the Fed’s next move. Several banks anticipate a slowdown or pause in QT, possibly announced at this week’s Federal Open Market Committee (FOMC) meeting. Evercore ISI analysts believe the Fed will slow the pace of Treasury bond runoff. They argue that acting in March would help the Fed avoid complications in May and June policy meetings.
Bank of America suggests QT might be paused due to uncertainty triggered by trade policy shifts. Meanwhile, Goldman Sachs expects a temporary QT pause in April, with plans to resume once the debt ceiling issue stabilizes. However, TD Securities does not foresee significant changes in QT policy at this stage.
The uncertainty stems from the Treasury’s cash management efforts. The federal borrowing limit has forced the Treasury to draw down its Fed account, temporarily injecting liquidity. Once the cap lifts, the Treasury will rebuild its account, removing liquidity again. This dynamic complicates QT’s impact assessment.
