Posted on 01/28/2024 11:01:53 AM PST by Kaiser8408a
Oh Susie QT. The Fed loves you. And The Fed has put a spell on the economy.
Where do we sit today? Bank credit growth has been negative for the last 26 weeks. As M2 Money growth has stalled.
What will The Fed do?
While the FOMC may start the discussions around tapering QT as soon as at this meeting, tapering itself is still a ways off, and the actual end of QT will come early next year.
In January and May 2022, the FOMC published the principles and then the plan for QT. The fact of a taper this year is not news. More recent communication from Fed officials (for example from President Logan and Governor Waller) reinforced a preference for the reverse repo (RRP) facility to be drawn down to zero, and we infer that getting the RRP near zero will be the starting point for the taper.
Historically, the FOMC has taken at least two meetings to finalize these types of plan, and the December minutes stressed a desire to give the market lots of advance notice. As a baseline, we think the FOMC announces the parameters for the QT taper at its May meeting and enacts that taper in June, by cutting the runoff of Treasury securities in half. Because the Fed’s RRP facility has been declining rapidly, that timing could shift earlier by a month or so.
The Fed’s balance sheet remains greatly expanded despite the increase in The Fed’s target rate. Nothing has been the same since the banking crisis of 2008-2009. And Covid in 2020.
(Excerpt) Read more at confoundedinterest.net ...
Is QE “quanitative tightening?” The opposite of QE?
Idiot Blennos. I obviously meant to ask about “QT.” I know what “QE” is.
Thank you. So it means raising interest rates in an election year. That seems unlikely.
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