The Powell Put is on – but when will it be rolled out?
On Wednesday, Federal Reserve Chair Jerome Powell confirmed that the central bank was close to determining a date when its balance sheet reduction will come to an end. A little more than a year since the Eccles Building began to wind down its $4 trillion balance sheet, Powell will reverse the move “fairly soon.”
“We’ve worked out, I think, the framework of a plan that we hope to be able to announce soon, that will light the way all the way to the end of balance sheet normalization,” Powell told the House Financial Services Committee.
He added that he does not intend for the Fed to return to a “very small” balance sheet prior to the financial crisis, which represented five percent of the gross domestic product (GDP), compared to 20 percent today.
The balance sheet consists mostly of mortgage-backed securities (MBS) and Treasurys, which were purchased to stimulate the national economy. Since October 2017, the Fed has taken $448 billion off the books.
With the U.S. economy seemingly cooling down, save the labor market, the Fed likely feels the need to spring into action by pausing moves on interest rates and hitting the brakes on decreasing the balance sheet.
The announcement could come as soon as the next Federal Open Market Committee (FOMC) meeting on March 19 and 20.
Are you kidding me, with government debt at 22+ Trillion dollars, the Fed will have to take even more $$$ on its books, not less. They know if they do not keep the DEBT BUBBLE inflated asset prices will crash.