Morgan Stanley: Changes in the Federal Reserve under Waller will be reflected through balance sheet reduction

According to Jin Shi's report, Morgan Stanley stated in a report that under the leadership of Powell, any substantial changes are more likely to gradually manifest through balance sheet policy rather than interest rates. Reducing the size of the Federal Reserve's balance sheet means lowering banks' demand for reserves, a process that takes time and also requires adjustments to the regulatory framework. Morgan Stanley added that, all else being equal, a Federal Reserve that adopts a smaller "presence" in both external communication and balance sheet size should drive the yield curve to steepen.