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I'm interested in what the Fed will say about their QT. Recently they said they'll lower their assets by $90 billion, which is only 1% when you consider that their balance sheet is $9 trillion.

If they stay with that, they're indirectly saying that they're either not serious about fighting inflation, or if they are serious about it then they plan to keep hiking interest rates bigly.

If they stay with that, they're indirectly saying that they're either not serious about fighting inflation, or if they are serious about it then they plan to keep hiking interest rates bigly.

Copy Jimmy Carter! Initiate another stagflation!

I believe they intend to reduce their balance sheet by as much as $95B per month until they drop about $1.5 Trillion.

Starting on Wednesday, the Fed will begin reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities by a combined $47.5 billion per month for the first three months. After this, the total amount to be reduced goes up to $95 billion a month, with policy makers prepared to adjust their approach as the economy and financial markets evolve.

The reduction will occur as maturing securities roll off the Fed’s portfolio and proceeds are no longer reinvested. As of September, the rolloffs will be occurring at “a substantially faster and more aggressive” pace than the process which started in 2017, according to the Wells Fargo Investment Institute.

By the institute’s calculations, the Fed’s balance sheet could shrink by almost $1.5 trillion by the end of 2023, taking it down to around $7.5 trillion. And if QT continues as expected, “this $1.5 trillion reduction in the balance sheet could be equivalent to another 75 – 100 basis points of tightening,” at a time when the fed-funds rate is expected to be around 3.25% to 3.5%, the institute said.

Fed to begin quantitative tightening: What that means for financial markets