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The Fed's Balance Sheet And Reverse Repo Operations Are Still Growing

the feds reverse repo
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EDITOR'S NOTE: Tapering from the Fed is the buzzword of the day in late 2021. In order to fight skyrocketing inflation everyone — even Fed Chair Jerome Powell, finally — agrees that the U.S.’s central bank has to tighten monetary policy to stop prices from growing at the incredible rate they currently are. However, with all the talk of tapering, it’s not happening yet. In fact, quite the opposite is happening, according to Confounded Interest. The Fed’s balance sheet continues to grow, and the reverse repos are at an all-time high. Now the Fed is saying that they might start tapering at their spring meetings in mid-March, which seems like it could be too late. Confounded interest asks, “So will Powell get back in the saddle again and actually do his job?” Right now, it doesn’t seem like it. 

I love listening to Fed talking heads (or Fear The Talking Fed). They mostly seem to acknowledge that inflation is a problem and that the excessive monetary stimulus should be reduced.

But then I see the chart of The Fed’s balance sheet and The Fed’s reverse repo operations.

Photo: Confounded Interest

Then we have Federal Reserve Governor Christopher Waller saying that Th Fed could start raising interest rates as early as its March 15-16 meeting, after deciding to end asset purchases sooner than planned. My question is … why wait until the March meeting?

Is it fear of the Omincron Variant (which sounds like a Frederick Forsyth thriller)? Does The Fed not want to rock the boat prior to the Christmas season? The US is at or near full employment, so what is the real reason for delaying a rate increase until March or June? Or the fear that Congress won’t pass Biden’s Build Back Better Act?

Fed Funds Futures infer that one rate hike will occur at the June Fed Open Market Committee (FOMC) meeting and one at the November meeting.

Photo: Confounded Interest

So will Powell get back in the saddle again and actually do his job?

Photo: Confounded Interest

Originally posted on Confounded Interest.

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