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Fed Policy Outlook: Quantitative Tightening Programme Facing Tough Challenges in 2023
485 Views22 Jan 2023 07:14
SUMMARY
- Rising uncertainty about the economic outlook and investors' lack of understanding about quantitative tightening (QT) have raised concerns of unintended and excessive US monetary tightening.
- Disintermediation by households is putting downward pressure on bank reserves via direct cash purchases of T-bills due to unattractive returns on certificates of deposits.
- The US debt ceiling impasse raises the prospect of QT being neutralised as depletion of the Treasury's General Account at the Fed is offset by an increase in bank reserves.
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