Written by Michael S. Derby
(Reuters) -The Federal Reserve Resolution has slowed the pace of the pace of the public budget last month last month with wide support from policy makers, despite the existence of a greater internal opposition to this transformation more than it understands, minutes from the last meeting of the central bank that was issued on Wednesday.
The minutes of the Federal Open Market Committee meetings indicated that the decision to stop stopping the bonds owned by the Federal Reserve follows a presentation from the New York Federal Reserve official responsible for implementing monetary policy.
This official put the case to slow down the surface flow while there was uncertainty about the extent to which congress raised the roof of the federal debt. The minutes said: “The director noted that the temporary suspension or the slowdown of the surface flow will provide meaningful insurance” against the possibility of reserves quickly after reaching the decision to roof of debt.
At the policy meeting from 18 to 19 March, the Central Bank said it would reduce the maximum number of treasury papers that will allow secession for $ 25 billion per month to $ 5 billion as of this month, while maintaining the maximum of $ 35 billion to withdraw the mortgage bonds that he had already fought.
The slowdown in the so -called quantitative tightening, or QT was widely expected. The immediate temporary suspension of the Federal Reserve Organization allows the movement to move in the period of uncertainty in the financial market due to government cash management issues amid a period of legally limited borrowing.
The official briefing newspaper in the New York Reserve Council described how to make the treasury debt management activities difficult to measure the real level of the market liquidity, which is likely to increase the risk of the Federal Reserve over the QT. The minutes said that slowing the clouds would deal with a potential trouble.
steady state
The QTC Cristen Waller Governor, who was often skeptical of the use of securities at the Federal Reserve as a political tool, was opposed to follow -up with the thicker at an unchanged pace.
The minutes showed that Warr had a company more than the aforementioned FOMC vote. Before the Federal Reserve meeting, Federal Reserve Chairman Peth Hamak, who did not vote this year, said in a Reuters interview that it was tending to move forward at QT and allow liquidity tools the Federal Reserve to deal with any fluctuations in the market about the effects of the ceiling market.
Wald also indicated in a statement that justifies his opposition that he wanted to see a more formal plan than the Federal Reserve on how to use its various tools to deal with the fluctuations of the money market, a problem that has been addressed so far.
To achieve this end, the minutes noted, “a number of participants commented that the current tools of the committee can also be used to help address the potential market disturbances of the reserves.”
The goal of the Federal Reserve with QT was to withdraw enough liquidity from the financial system to allow the volatility of the short -term interest rates and maintain the company’s control over the federal funds, the main lever of the Central Bank to influence the economy. Officials are looking for markets for signs about the amount of liquidity they can take out safely, but with the formulation of the cabinet with the roof of the debt, these signals are blocked.
Without the debt roof issue, the Federal Reserve may have been filled with Steam Steam on QT. Speaking last month after the FOMC meeting, Federal Reserve Chairman Jerome Powell said that market indicators indicate that “the amount of reserves are still abundant.”
The issue of debt limit, in the absence of some immediate actions of Congress, may remain in place for some time. Last month, the Congress Budget Office said that the government’s means of managing money during borrowing will be exhausted by August or September.
The extended slowdown
Powell seemed to argue at the press conference to see the post -FOMC meeting that the low pace of QT is the new natural even after Congress raises the roof of the debt because it allows a more gradual approach to the point where QT will need to stop. “If you are almost cutting the QT pace, it is likely that the runway will double,” which he said has appealed to policy makers. He added: “It is a kind of sound thing.”
New York Reserve Chairman John Williams, speaking about Yahoo, on March 31, witnessed a long -term value in the Slowa QT. Since the end point waves at the horizon at the end, “We come at a slower speed and can collect data, understand what is going on and avoid any unnecessary bumps along the way.”
Federal reserve officials have repeatedly said that what is happening with QT stands regardless of the main payment of monetary policy, associated with the level of federal funds. The withdrawal of the public budget on the Federal Reserve was acquired to the Central Bank’s holdings from the peak of 9 trillion dollars in 2022 to the current level of $ 6.8 trillion.
For some time, there was little clarity about the extent that the Federal Reserve Bank could take the QT process. A recent note from the economists of Goldman Sachs, they reached the end point at some point in the third quarter of this year. Meanwhile, MORGAN Stanley expected that QT could extend to the next year now after the slowdown is slow.
One of the wrinkles of QT expectations is the increasing tension facing financial markets, as President Donald Trump continues an aggressive trade war against almost all major trade partners in America. The customs tariff system and the uncertainty surrounding it led to deep losses in the stocks, and in the eyes of many economists, they put the United States and other large countries on the right track of the great economic decline.
This drives the markets to the price in more discounts in the federal reserve rate. Although the Federal Reserve is somewhat of the very low prices that forced in the past to buy bonds as a form of stimulation, the aggressive cut scenario can again change federal holdings and suggests a wide return to purchase.
(Participated in the reports of Michael S. Derby; edited by Andrea Ricci)
