According to the Wall Street Journal, the Federal Reserve has been executing its balance sheet reduction plan for the past three years, but has now decided to slow the pace of the balance sheet reduction. Why is it making changes? Likely because the Fed is trying to avoid a repeat of what happened in 2019. At that time, the Fed was also reducing its balance sheet, but the balance sheet reduction led to tensions in the overnight funding market, and the market became illiquid, forcing the Fed to make a 180-degree turn and expand its assets again. Due to the interaction between the Fed's balance sheet reduction plan and the necessity for Congress and the White House to raise the debt ceiling, the likelihood of a minor issue in the market will increase in the coming months.