The Fed’s Balance Sheet Reduction (QT) Update
The Fed took the week off. Our view is that the Fed ought to allow the market to set its overnight bank borrowing rate. The Fed should instead focus its efforts on managing the money supply. It feels as though the next great inflation cycle is around the corner. It is easy to imagine the Fed inflating M2 by another 20-30% over the next 5 years. That’s when the ASP on a new car will be $100K, a dozen eggs will cost $20, and 60% of all jobs created will come from the Government sector. Treasury Debt will be $47 Trillion in 2029 which means further Dollar destruction and elevated prices.
Treasuries: The Fed’s Treasury security holdings were unchanged for the week-ended August 7th. The Fed’s Treasury holdings declined by $22.4 billion on a rolling 4-week basis.
Agencies: The Fed’s Government Agency security holdings were unchanged for the week-ended August 7th and declined by $17.8 billion on a rolling 4-week basis.
The Fed’s balance sheet holdings: https://www.newyorkfed.org/markets/soma-holdings
Excel file: Our Excel file detailing the Fed’s holdings of Treasury and Agency securities: HERE.
