This Finance survey examines (a) The Federal Reserve has begun quantitative tightening (QT) to reduce the size of its balance sheet. Fed holdings of Treasury securities have declined by $800 billion relative to the March 2020 peak. The Fed currently holds $4.9 trillion of Treasury securities, significantly larger than the $2.5 trillion holdings prior to the Covid pandemic. A reduction in Fed holdings of Treasury securities measurably increases the interest rate on long-term U.S. Treasury bonds (b) A reduction in Fed holdings of Treasury securities measurably increases volatility in the Treasury market
Keyword: quantitative easing
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This week’s European Economic Experts Panel statements:
A) The ECB's asset purchases over the past two years have reduced the threat of deflation in the euro area as a whole.
B) If the economic outlook in the euro area becomes less favorable, then increasing the ECB's asset purchase program (in size or duration) would substantially increase the euro area's economic growth over the following five years.
This week's IGM Economic Experts Panel statement:
The ratio of the 90th to the 10th percentile of the US income distribution has been unaffected by the Federal Reserve’s unconventional monetary policies since the financial crisis.
This week’s IGM Economic Experts Panel statement:
Informed postmortems of Ben Bernanke’s Fed chairmanship will judge favorably the Fed's creative and aggressive policy initiatives from autumn 2008 through early 2009.
This week’s IGM Economic Experts Panel statements:
A: Enactment of the Senate bill to subject the Federal Reserve's monetary policy and discount window decisions to an audit by the Comptroller General of the U.S. would improve the Fed's legitimacy without hurting its decision making.
B: The Fed should not reduce its purchases of mortgage-backed securities and treasurys until there is clearer evidence of strong and sustained employment growth.
This week's IGM Economic Experts Panel statements:
A: Even if the third round of quantitative easing that the Fed recently announced increases real GDP growth over the next two years, the increase will be inconsequential.
B: Even if the third round of quantitative easing that the Fed recently announced increases annual consumer price inflation over the next five years, the increase will be inconsequential.
C: Even if inflationary pressures rise substantially as a result of quantitative easing and low interest rates, the Federal Reserve has ample tools to rein inflation back in if it chooses to do so.
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