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POSTED ON September 30, 2022  - POSTED IN Exploring Finance

The Fed has found it easier to raise rates than shrink its balance sheet. September was supposed to be the month when the Fed got serious about shrinking the balance sheet. After a few months of warming up with $47.5B monthly reductions, the Fed was going to step up in September and shrink by $95B ($60B in Treasuries and $35B in MBS).

That didn’t happen.

POSTED ON July 29, 2022  - POSTED IN Exploring Finance

Another month in and the Fed is still struggling to implement Quantitative Tightening (QT). According to the plan the Fed outlined last May, the central bank should be shrinking the balance sheet by at least $47.5B a month, spread between $30B in Treasuries and $17.5B in MBS.

That’s not happening.

POSTED ON July 1, 2022  - POSTED IN Exploring Finance

The first month of Federal Reserve balance sheet reduction turned out to be a big dud. As it turns out, the balance sheet shrank by less than $1 billion in June during the first month of quantitative tightening.

As part of its vaunted inflation fight, the Fed announced in May that Quantitative Tightening (QT) was set to begin last month. From Reuters:

POSTED ON May 27, 2022  - POSTED IN Exploring Finance

Despite rising through the month, the Fed balance ended up shrinking slightly by $25 billion in May, even as it slightly increased its Treasury holdings.

This was the first monthly decline in the balance sheet since $220B of “Other” rolled off in July 2020. In that case, “Other” were repurchase agreements with foreign entities to provide liquidity and alleviate stress in the global markets.

POSTED ON May 24, 2022  - POSTED IN Original Analysis

The Federal Reserve has talked a lot about fighting inflation. But what has it actually done?

In practice, not a lot. It has nudged interest rates up 75 basis points. And while the Fed has ended the massive quantitative easing program that it ran during the pandemic, it pushed balance sheet reduction back from May until June. In fact, the balance sheet has crept upward throughout the entire month of May.

POSTED ON March 28, 2022  - POSTED IN Key Gold Headlines

Earlier this month, the Federal Reserve launched its first salvo against inflation, raising interest rates by a quarter-percent. It was a pretty weak shot given 7.9% CPI, but Jerome Powell and other Fed presidents ratcheted up the tough rhetoric last week. Powell raised the possibility of 50 basis-point rate hikes at future meetings and San Francisco Fed President Mary Daly, “With the labor market so strong, inflation, inflation, inflation is top of everyone’s mind.”

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