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The spotlight will return to US monetary policy when the Federal Reserve releases the minutes of its May meeting on Wednesday.

Investors are particularly keen to gain insights about when the central bank might start shrinking its bloated balance sheet as part of the emergence from the ultra-unorthodox policy of the post-financial crisis era.

Some analysts don’t think the minutes will show the Fed discussed such a balance sheet shift in any great detail.

But you never know. And investors are certainly wary about the impact the suggested timing might have on the dollar and fixed income markets.

In the minutes of its March gathering the Fed said a change in its bond reinvestment policy would “likely be appropriate later this year”.

Steven Ricchiuto, chief US economist at Mizuho, thinks the next step in the normalisation process is likely to come into focus immediately after the Fed raises interest rates after June deliberations. Traders, however, may have to wait a few months for specific action.

“We expect the Fed [will] announce the details of the programme to shrink its balance sheet in September and give the markets till late this year if not early 2018 to begin the unwind.

“We look for the first phase to total $1-1.2tn split between both Treasuries and mortgage-backed securities, and to have minimal effect on the duration of the debt outstanding,” adds Mr Ricchiuto.

jamie.chisholm@ft.com

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