[HN Gopher] Fed lifts rates by half point, starts balance sheet ...
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       Fed lifts rates by half point, starts balance sheet reduction June
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       Author : rntn
       Score  : 11 points
       Date   : 2022-05-04 21:13 UTC (1 hours ago)
        
 (HTM) web link (www.reuters.com)
 (TXT) w3m dump (www.reuters.com)
        
       | jdhn wrote:
       | >In a news conference after the release of the Fed's policy
       | statement, Powell explicitly ruled out raising rates by three-
       | quarters of a percentage point in a coming meeting, a comment
       | that triggered a stock market rally.
       | 
       | This is pretty key IMO. This indicates to me (and the market)
       | that the Fed will retain a sense of dovishness which means that
       | if key indicators (other in than inflation) start going down too
       | fast, we may see the Fed rethink their decision to hike rates.
        
         | halJordan wrote:
         | I am jdhn. I speak for the markets.
        
         | vmception wrote:
         | The Fed is giving themselves 3 years to lower the balance sheet
         | by $3 trillion, down from $8.9 trillion.
         | 
         | I have no faith that there will be 3 consecutive years of data
         | for them not to change course and balloon that balance sheet
         | right on up.
         | 
         | Its an interesting start, they just have so much to do!
         | Fortunately this is a bit of a word game for them, as their
         | balance sheet consists of assets that mature and otherwise
         | self-delete eventually (and dollars the Federal Receives
         | receives as principle or interest is deleted, instead of
         | pooling or recirculating in the economy). So they are selling
         | $95bn of those per month, and also letting the clock run out on
         | others, while the price/valuation declines on all if they flood
         | the market with stuff they've been holding, all while not
         | buying any more. so maybe they really can get the value of
         | their balance sheet down, without exactly crashing the market
         | but still somewhat risking flooding it. A 10% decline (in those
         | particular markets, bonds) reduces their balance sheet by
         | nearly $1 trillion by itself.
        
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       (page generated 2022-05-04 23:02 UTC)