Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

<p>The art of Fed watching has changed over the decades to its current state of analysing potential changes to forward guidance, as  the size and composition of the central bank's balance sheet. Greater-than-required attention to the speeches and testimonies of Fed officials has become common, while political influences on policy conduct will require deeper analysis over the next year.</p>
<p>The conduct of fiscal policy has significantly boosted the level of bank reserves during 2021 H1 by forcing the Treasury to significantly reduce its cash balance at the Fed. Meanwhile, the impasse on raising the debt ceiling could introduce some dysfunctionality to the US Treasury market as auction schedules become uncertain.</p>
<div>High US budget deficits have boosted the available collateral for participants in the repo market and, consequently, any reduction in Treasury borrowing could encourage investors to seek alternative places to park their cash. The Fed's overnight reverse repo programme could become an increasingly popular haven for cash if T-bill auctions are suspended due to the debt ceiling impasse. The Fed will be keen to avoid any repeat of the stress that appeared in funding markets that appeared in September 2019 that required intervention via purchases of T-bills.</div>
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<div>The arrival of a prolonged debt ceiling impasse will remove fiscal policy support for aggregate demand, thereby potentially raising the ante on the Fed to delay changing policy settings. Meanwhile, the Biden Administration appears more enthusiastic about offering Chair Powell a second term next February on the pretext that the Fed under his helm will be more amenable to support the economy before the mid-term elections, particularly in the absence of any further easing of fiscal policy.</div>

The art of Fed watching has changed over the decades to its current state of analysing potential changes to forward guidance, as  the size and composition of the central bank's balance sheet. Greater-than-required attention to the speeches and testimonies of Fed officials has become common, while political influences on policy conduct will require deeper analysis over the next year.
The conduct of fiscal policy has significantly boosted the level of bank reserves during 2021 H1 by forcing the Treasury to significantly reduce its cash balance at the Fed. Meanwhile, the impasse on raising the debt ceiling could introduce some dysfunctionality to the US Treasury market as auction schedules become uncertain.
High US budget deficits have boosted the available collateral for participants in the repo market and, consequently, any reduction in Treasury borrowing could encourage investors to seek alternative places to park their cash. The Fed's overnight reverse repo programme could become an increasingly popular haven for cash if T-bill auctions are suspended due to the debt ceiling impasse. The Fed will be keen to avoid any repeat of the stress that appeared in funding markets that appeared in September 2019 that required intervention via purchases of T-bills.

The arrival of a prolonged debt ceiling impasse will remove fiscal policy support for aggregate demand, thereby potentially raising the ante on the Fed to delay changing policy settings. Meanwhile, the Biden Administration appears more enthusiastic about offering Chair Powell a second term next February on the pretext that the Fed under his helm will be more amenable to support the economy before the mid-term elections, particularly in the absence of any further easing of fiscal policy.

Fed Watchers Beware: Debt Ceiling and Fiscal Policy Standoffs Could Impact US Monetary Policy