{"id":53828,"date":"2020-06-23T14:02:02","date_gmt":"2020-06-23T19:02:02","guid":{"rendered":"https:\/\/olduvai.ca\/?p=53828"},"modified":"2020-06-23T14:02:06","modified_gmt":"2020-06-23T19:02:06","slug":"plot-thickens-on-end-of-qe-start-of-shedding-assets","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=53828","title":{"rendered":"Plot Thickens on End of QE &#038; Start of Shedding Assets"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/wolfstreet.com\/2020\/06\/22\/plot-thickens-on-end-of-qe-start-of-shedding-assets\/\">Plot Thickens on End of QE &amp; Start of Shedding Assets<\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Fed leads in trimming its balance sheet; Bank of England governor publishes the reasoning for central banks to shed assets \u2013 before raising interest rates. A big shift!<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Fed has been cutting back for weeks on its asset purchases, and on its last weekly balance sheet,&nbsp;<a href=\"https:\/\/wolfstreet.com\/2020\/06\/18\/fed-ends-qe-total-assets-drop-liquidity-injection-ends\/\" target=\"_blank\" rel=\"noreferrer noopener\">its total assets actually fell by $74 billion<\/a>. Now Bank of England Governor Andrew Bailey published a piece on&nbsp;<a href=\"https:\/\/www.bloomberg.com\/news\/articles\/2020-06-22\/andrew-bailey-central-bank-reserves-can-t-be-taken-for-granted\" target=\"_blank\" rel=\"noreferrer noopener\">Bloomberg Opinion<\/a>&nbsp;today in which he wrote that these massive central-bank balance sheets \u2013 he was talking in global terms \u2013 \u201cmustn\u2019t become a permanent feature.\u201d<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cAs economies recover, it\u2019s likely that some of the exceptional monetary stimulus will need to be withdrawn,\u201d he said. And this shedding of part of the bonds that had been purchased would happen&nbsp;before&nbsp;the central bank raises interest rates, he said.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is the opposite of how the Fed did it last time: It started raising rates in December 2015 and started shedding Treasury securities and MBS in October 2017.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This time, the Fed front-loaded $2.8 trillion in QE and has already started shedding some of it even as FOMC members don\u2019t see interest rate hikes through 2022. This is a big shift, of reducing the balance sheet first, and then raising rates.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In Bailey\u2019s piece, there was no word of negative interest rates or yield curve control. What he is saying is that the balance sheet became the primary tool for adding stimulus and will become the primary tool for withdrawing stimulus, as interest rates remain near-zero.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">And he is saying that the BOE\u2019s balance sheet isn\u2019t going to stay this massive for long and that it will undo some of the accommodation as the economy figures out where the new normal is.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The Fed is leading. The BOE is publishing the reasoning for other central banks to do the same.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Plot Thickens on End of QE &amp; Start of Shedding Assets Fed leads in trimming its balance sheet; Bank of England governor publishes the reasoning for central banks to shed assets \u2013 before raising interest rates. A big shift! The Fed has been cutting back for weeks on its asset purchases, and on its last [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[23741,124,303,4254,4255],"class_list":["post-53828","post","type-post","status-publish","format-standard","hentry","category-economics","tag-central-bank-balance-sheet","tag-central-banks","tag-fed","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53828","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=53828"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53828\/revisions"}],"predecessor-version":[{"id":53829,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/53828\/revisions\/53829"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=53828"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=53828"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=53828"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}