JPMorgan’s predictions of Fed policy are of significant concern in the financial markets. We’ll bring together recent media reports and expert opinions to confirm the facts.
Key Information Summary:
- Quantitative Austerity (QT) Ending Expected:
- A number of financial institutions, including JPMorgan, expect the Fed to end quantitative tightening (QT), or with the coming months program.
- Some recent reports (Oct. 23) suggest that liquidity pressures and lower bank reserves may end “this month”, which sees QT end times earlier.
- Fed Chairman Jerome Powell also said he plans to suspend QT when reserves in the banking system reach “sufficient levels,” and noted that the timing is **’coming’.
- However, it may not be definitively predicted that QT will be terminated “next week”, and it is highly likely that QT will be terminated “soon” or “this month”.
- Quantitative easing (QE) conversion and short-term government bond purchases:
- From major reports to date, it’s hard to find a prediction that the Fed will begin “quantitative easing (QE) right next week. QE means liquidity injection, and the end of QT only means stopping liquidity recovery, not immediately a shift to active liquidity injection (QE).
- Just shutting down QT itself expects to have an “easing” effect on the market, easing liquidity pressures.
- Forecasts for short-term Treasury purchases have not been clearly confirmed. However, the possibility of the Fed rebalancing its asset composition (such as Operation Twist) or intervening in the market to manage liquidity after QT can always be discussed among market experts.
Conclusion: - QT End Forecast: JPMorgan and other major agencies are predicting that the Fed is very likely to end quantitative tightening soon (within this month or months). The “next week” end is seen as one of the most aggressive forecasts.
- QE TRANSITION PREDICTION: Forecasts of QT ending next week and immediately switching to “quantitative easing” have not been confirmed in major reports to date. QT termination means the end of austerity, not QE.
So, “the Fed will end its quantitative tightening next week and make quantitative easing” is likely overstated by market expectations and some aggressive forecasts. While the QT end is dominated by predictions that it is imminent, the immediate shift to QE is unconfirmed information.