[Morgan Stanley: Fed's Balance Sheet Expected to Shrink by $1.5 Trillion] According to a report by Cailian Press, Morgan Stanley economists Seth Carpenter and Michael Gapen stated in a report that the bank's baseline forecast is that the Federal Reserve will reduce the size of its balance sheet by approximately $1.5 trillion over about two years, potentially starting as early as the first quarter of 2027; a reasonable reduction range is between $600 billion and $2.5 trillion.