Call On Savings Equal To 1.6% Of GDP

The most prominent uncertainty facing markets in 2018 is central bank balance sheet unwinding. For the first time since the financial crisis began, this year the Federal Reserve will be a net seller of assets (if everything goes to plan) meanwhile, the European Central Bank and Bank of Japan will be winding down their asset purchase programs.

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The Fed is winding down its assets with initial monthly caps on runoff of $6 billion for Treasuries and $4 billion for mortgage-backed securities. The caps will increase every three months by $6 billion and $4 billion, respectively, until they reach $30bn for Treasuries and $20bn for MBS.  As the Fed’s balance sheet run-off gains traction next year, Goldman estimates the CB will...