😶‍🌫️Powell Suggests Stop Quantitative TighteningPowell Suggests Stop Quantitative Tightening

Powell Suggests Stop Quantitative Tightening… And I heard the news that, in the minutes of the FOMC in September, there was a question of what kind of judgment should be made between growth and inflation… So there was a simulation of what the Fed sees as the right reserve and how much the reserve will reach if we continue the quantitative tightening program at the current pace. At the current pace, it’s going to be about 2.8 trillion dollars in March next year… If Waller Is Around $2.7 Trillion In Past Remarks… It’s a similar level when you don’t have to go down further, when you’re saying, “Isn’t it going to be a necessary level of reserves?”

Today, Powell said this, quote.

“Our long-standing plan is to stop shrinking our balance sheet when the reserves reach a level slightly above what we see as ‘sufficient preparedness’,” Powell said. “We should be able to approach that point in the next few months, and we are closely monitoring a wide range of indicators to determine that,” he said. (Obsolutely)

Powell said in his post-speech talk that indicators the Fed is watching “remains of reserves remain abundant” but that “a little tightening is starting to be seen” in the money market, with repo rates rising. He added that the end of QT was “not that far away, but there is a way to go.” (Yonhap Infomax, 25. 10.15)

If you look at the first paragraph… They’re saying that we’re going to get to a point where we’re going to stop quantitative tightening in the next few months, and at a slightly higher level than I think it’s going to be, say, 2.7 trillion dollars, for example, right now it’s just over 2.9 trillion dollars… I think it’s going to mean that we’re going to cut it a little bit further, and we’re going to stop at around $2.8 trillion, and we’re going to have access to this point in a few months. If you look at the paragraphs that follow… We’re talking about a little bit of austerity starting to show up, yeah, a little bit more here… He says he’ll stop in the near future. But by saying that there’s a little more time left, I think we’re looking at March of next year, which was simulated in this minutes. I think he’s thinking about stopping quantitative tightening and going right before he leaves office next year. After two more rate cuts have been made by the end of this year… early next year, when rate cuts are still in place, the process of suggesting a halt to quantitative tightening in January and actually stopping in March… I think today’s interview alone is looking at that timeline.

Quantitative tightening stops… It can be a factor that lowers interest rates on long-term government bonds. In particular, it’s a factor that lowers interest rates on 10-year government bonds… This could potentially stimulate the dollar to weaken. I think there will be pretty high volatility in terms of interest rates and exchange rates by early next year.

And rather than this, why did Powell say at this point, some kind of hint of a pause in quantitative tightening? There’s a lot of attention on the background. There’s been an extraordinary recent uptick in interest rates in the repo market. And that was often seen back in September. Personally, I think it’s because of the flow of too much liquidity into excessively illiquid assets. And this is a form of investment and lending that covers all of them… There has been a significant increase in the number of non-bank financial institutions that usually play the role of liquidity providers that banks do.

Although the bank’s reserves are abundant… There are two types of banks: big banks and small banks. Big banks are pretty much monopolizing them right now. So when you cut down on your reserves… While big banks have huge liquidity… Small banks do not have a very high proportion of their abundant reserves… You’ll experience more money reduction due to quantitative tightening. In this case, small banks’ anxiety can increase. If you look at the actual stock price trend of local bank ETFs… It can be seen that it has not changed significantly from the stock price at the time of SVB bankruptcy in March 23.

And in addition to small banks, non-bank financial institutions… Hedge funds, asset managers, and other private equity lenders could be like this. They’re often increasing their loans to risky assets because regulations aren’t as strong as banks. The Fed seems to be thinking about this side as well… At a time like this… JPMorgan’s performance was announced, and CEO Dimon says, “Let’s quote this.

“The Wall Street spokesman” Jamie Dimon, chairman and CEO of JPMorgan Chase, warned that it could be a sign of crisis in the U.S. financial market, citing the bankruptcy of the auto mortgage lender.

According to CNBC on the 14th (local time), Dimon said at a third-quarter earnings presentation that “if there was one wheelworm, there would be probably more (in reality),” regarding the recent bankruptcy of auto mortgage company Tricolor. “Everyone should be wary of this in advance.” (Yonhap Infomax, 25. 10.15)

In the second paragraph… And we get the word cockroach. And people like me who have had financial crises in the past… I’m surprised to see these similar words. I’ll talk about them in more detail in later essays. And of course, as Secretary of the Treasury Bessent once passed, Dimon tends to worry too much… But… As a manager, Dimon has no choice but to consider various risks. During the financial crisis… The reason why JPMorgan was able to survive relatively soundly was risk management. At that time, Chairman Dimon was at the center. Maybe… He seems to be meticulously watching every little incident. Automobile loan companies. It’s a representative non-banking financial institution… Looking at the bankruptcy here… They always say that you should not let your guard down. Even if it’s unlikely to happen right now… if you’re prepared for it… When a black swan appeared… You can minimize the impact.