Fed’s Powell sees a ways to go on shrinking Fed holdings
By Michael S. Derby
Three-day testimonies in New York (Reuters) – Federal Reserve President Jerome Party said that there is no imminent ending of the Central Bank’s balance, as some banks have moved to their own completion. The process is usually called quantitative. tightening.
“I think we have ways” to reduce the size of the Central Bank’s bonds, and there are still signs that the liquidity of the market is sufficiently reduced on the panel of the treasury and mortgage bonds.
Powell’s observations about quantitative tightening or QT are coming, as Fed has poured out more than 2 trillions of its reserves. Fed seeks to extinguish liquidity, which has increased in markets, in the phonemon -1 epidemic, when it gone to trillions, market growth by lowering the long-term loan costs.
As Fed began to reduce the total liquidity of the market, which is clearly measured at the level of bank resources, which allow the normal level of money market interest rates, its main means to influence the momentum. :
Fed also tries to avoid re-equipment of the events of September 2019, when it was very liquidity due to the system during the last QT chapter, which requires that the dish began to start aggressively.
Fed has taken a number of steps to avoid this event, as it will slow down its revival and establish new liquidity institutions, at the same time providing more guidance on the factors viewed. But it has struggled to offer a lot of guidance on when it can stop QT, except that it doesn’t appear that day.
In recent days, some banks have pushed their QT Endgame ratings compared to the latest agreement, which gained at the date of termination.
“The latest communication suggests that Fed is pleased that QT continues to run, despite the future of the low visibility, the economists of Goldman Sachi are celebrated on Friday.
The bank’s forecasts say that before they were expecting the Fed to be windy at the end of the second quarter, now those who take place at the end of the third quarter and the mortgage escape ended by the third quarter.
Morgan Stanley Economyists also hit the QT way.
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