Powell Suggests QT Ends in Months ๐
- It could be close to the final stage of shrinking its balance sheet in a few months.
- There are some signs of liquidity tightening in the short-term funds market.
- The Fed believes it can afford to adjust its balance sheet to be more agile.
- Fed officials are discussing the composition of the balance sheet.
- In the long run, it aims to maintain a balance sheet centered on government bonds.
- The Fedโs policy instruments are working very effectively.
- Disenfranchising the Fedโs authority to pay interest would greatly complicate the adjustment of interest rates.
- For reference, according to recent Fed membersโ comments, the appropriate reserve level is expected to be between $2.7 and $2.8 trillion, and the time to reach that standard is expected to be around the second quarter of next year. ๐โ๏ธ
[Policy interest rate]
- The downside risk to the job market has increased.
- This supports the legitimacy of the September rate cut.
- Recent data point to a โlow-hire, low-fireโ phase in which employment does not increase or decrease actively.
- At the same time, data are confirming that tariffs are increasing price pressures.
- Currently, there is no โrisk-free pathโ at all.
- The indicators now secured show that the U.S. economy is at a similar level to Septemberโs.
- Indicators before the shutdown suggested growth was better than expected.
- The future direction of monetary policy will be determined by data and risk assessment.