Goldman Sachs: Watch For ECB Balance Sheet Normalization

Get ready for interest rate normalization to shape central bank balance sheets to more traditional levels, achieving mean reversion after a significant trend of magnitude towards accommodation that has been historic in nature. Goldman Sachs analysis didn’t use the exact words, but they did note with this new “neutral” central bank balance sheets will be larger than before the 2008 financial crisis, will hold more duration and, as a result the yield curve could flatten as a “neutral” stance is achieved. The report interestingly pointed to an additional tool in the Fed tool kit should it be needed. Goldman Sachs:…