(Bloomberg) -- Morgan Stanley analysts predicted the Federal Reserve will stop reducing the size of its balance sheet in 2024 after cutting interest rates for the first time the previous December.

So-called quantitative tightening may still end early “if the economy goes into recession and the Fed is contemplating big cuts of 100 basis points or more,” analysts including chief economist Seth Carpenter wrote in a report to clients. “Similarly, if markets were dysfunctional along the lines of March 2020 or the recent episode in the gilt market, we would expect QT to end, at least temporarily.”

Fed officials said last week they will continue to reduce their holdings of Treasuries and mortgage-backed securities as planned -- a pace amounting to about $1.1 trillion a year.

They began reducing their balance sheet in June before stepping up the pace in September. They now seek to roll $60 billion of Treasuries and up to $35 billion of mortgage-backed securities off their balance sheet each month. 

“The Fed’s plan is to shrink the balance sheet a lot, but avoid a repo market squeeze like in September 2019,” the Morgan Stanley analysts said. 

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