By Michael S. Derby
New York (Reuters) -For two days of testimonies this week before the congress, Federal Reserve chairman Jerome Powell indicated that there is no threatening end to the Down process of the Central Bank, because some banks have moved to their own End date back for a process is usually called quantitative tightening.
“I think we have a way to go” in reducing the size of bonds in the central bank and there are no signs that the market is enough for the market to reduce the reduction in FED in the possession of treasury and mortgage bonds To influence, Powell told a house panel on Wednesday.
The observations of Powell about quantitative tightening, or QT is because the Fed has thrown slightly more than $ 2 trillion from its participations. The FED tries to extinguish the liquidity it added to markets during the COVID-19 Pandemie, when he bought trillions in bonds to stabilize markets and reduce the economic growth of the geese by reducing loan costs in the longer term.
Since the FED started with QT, it has tried to reduce the overall market liquidity, most clearly measured in the level of bank reserves, to levels that make normal levels of the interest rate of the money market possible, while the FED Firm allows control over the federal fund rate , the most important tool to influence the momentum of the economy.
The FED also tries to avoid a repeat of the events of September 2019, when during the final chapter of QT too much liquidity was taken out of the system, which means that the FED has to add aggressively.
The FED has taken a number of steps to prevent this from happening again, such as slowing down the pace of the drawing and setting up new liquidity facilities, while offering more guidance about the factors it looks at. But it has difficulty offering a lot of guidance about when it can stop QT, except to say that that day does not seem imminent.
In the past few days, some banks have reduced their QT end play estimates with regard to the most recent consensus, which looked at a stop date in June.
“Recent communication suggests that the FED content is to run QT, despite the potential for low visibility in the reserve question in the coming months because of the dynamics of the debt limit,” said Goldman Sachs economists in a report on Friday.
Bank predictors said that although they expected that the FED would end the drawing at the end of the second quarter, they will now see it happening at the end of the third quarter, with the Treasury Bond stopping at the end of the second quarter and the mortgage finished against the third quarter.
Morgan Stanley economists also kicked the QT Can Down the Road.