Strategists at Bank of Montreal indicated that the Federal Reserve could adopt strategies used by the Bank of England to reduce its balance sheet without unsettling financial markets. Laurence Mutkin, Head of EMEA Rates Strategy at the bank, noted that the Bank of England successfully reduced its bond portfolio by almost half over a four-year period without causing significant market disruption. He highlighted that this included providing ample liquidity support: the Bank of England introduced short-term liquidity tools—Short-Term Repos (STR) and Indexed Long-Term Repos (ILTR). STR is a weekly mechanism that allows banks and building societies to borrow central bank reserves for one week, using high-quality collateral such as UK government bonds. ILTR is a weekly auction operation that permits financial institutions to borrow central bank reserves for a six-month term, backed by eligible collateral. Mutkin emphasized that clear communication regarding the use of liquidity tools, including market consultations, helps mitigate risks during the balance sheet reduction process. He stated, "There are lessons to be drawn from the Bank of England's approach that could offer a comparable framework for the Fed, potentially under Kevin Warsh's leadership, to advance its balance sheet reduction." Kevin Warsh, nominated by former US President Donald Trump for the role of Fed Chair, has publicly expressed his desire to shrink the balance sheet. The Federal Reserve paused its balance sheet reduction efforts in 2019 and again in 2025.