An array of economists polled by Reuters expects the U.S. Federal Reserve to hike interest rates sometime in the fourth quarter and announce the beginning of balance sheet trimming at the September meeting. The expectations are almost in line with the guidance provided by Fed policymakers. However, some of the policymakers, including Lael Brainard, a member of the Federal Reserve Board of Governors, who has a permanent vote at FOMC, suggested that while balance sheet trimming can begin soon, she is not sure about the third interest rate hike this year.

In the wake of weak economic dockets being published from the United States, the financial markets have scaled back their expectations of the third hike in December. As of today, the market participants are pricing just 47 percent chance of a hike in December and next hike is being priced in March next year. The Fed has raised rates twice so far this year. So while the Fed pauses for the next opportunity to raise rates, about two-thirds of economists say the central bank is expected to announce the course of action it will take to unwind its massive bonds portfolio in September. However, the initial unwinding will begin at $10 billion per month, which will be increased by $10 billion every three months until it reaches the ceiling fixed at $60 billion per month. At this rate, it would take 5-7 years for the Fed to bring down the balance sheet to a pre-crisis level.