Powell Suggests QT Ends in Months 🚀

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 Fed’s policy instruments are working very effectively.
Disenfranchising the Fed’s authority to pay interest would greatly complicate the adjustment of interest rates.
For reference, according to recent Fed members’ 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. 🙇♂️

[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 “low-hire, low-fire” 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 “risk-free path” at all.
The indicators now secured show that the U.S. economy is at a similar level to September’s.
Indicators before the shutdown suggested growth was better than expected.
The future direction of monetary policy will be determined by data and risk assessment.