Economists Say Fed Could Cut Balance Sheet in 2023, Critics Insist Central Bank Didn’t Cut QE at All – Bitcoin Economics News


With US inflation soaring, economists from monetary policy analysis and forecasting firm LH Meyer say the US Federal Reserve could stop trimming its balance sheet earlier than expected. However, critics said the US central bank never really trimmed the Fed’s balance at all, and the entity was accused of keeping quantitative easing (QE) practices going by continuing to buy long-term securities from the market.

Forecasting firm LH Meyer expects the Fed to cut the balance sheet earlier than expected, while central bank cuts remain in dispute.

US monetary policy makers are armed with the economy’s inflationary pressures and the current debate over the technical definition of a recession. Analysts believe the Federal Reserve will raise the federal funds rate by at least 75 to above 100 basis points at the next meeting.

In addition to raising interest rates, the Fed He said Last year, he said he would cut the $8.5 trillion balance sheet by June 1. The central bank said at the time that it would slowly stop buying mortgage-backed securities (MBS) and maturing Treasuries.

With the war in Ukraine raging and inflation at the highest pace in more than 40 years last month, many economists believe the US central bank has a lot of work to do when it comes to its monetary tightening practices. Former President Barack Obama’s former economic adviser, Larry Summers, recently indicated that the Federal Reserve has a problem to deal with.

Speaking of slack, Summers insisted that things would depend on “how skilled [Federal Reserve] It turns out that … they have a very difficult problem of equilibrium in the position of monetary policy, given the situation in which we find ourselves.”

The latest US Consumer Price Index (CPI) report showed that June reversed a 9.1% year-over-year increase. Inflation has caused a number of people to be skeptical that the Fed will be pessimistic with the next increases in the federal funds rate, and possibly halt the central bank’s cut in quantitative easing.

However, the Fed’s balance sheet cut that was supposed to start in June did disputedMany observers Think The Fed continued quantitative easing. On the other hand, economists from forecasting firm LH Meyer say the Fed’s cut “could stop early as recession risks rise,” according to Report Published by The Wall Street Journal (WSJ).

Economists say the Fed may cut the balance sheet in 2023, critics insist the central bank didn't cut quantitative easing at all

The Wall Street Journal article explains that the risks of a recession could cause the Fed to stop trimming its balance sheet “sooner than expected,” according to LH Meyer economists. The company’s researchers anticipate a recession in 2024. Moreover, the report states that it is possible for the US central bank to halt quantitative tightening (QT) by next year.

When WSJ subscriber Several editorialists via Twitter criticized the entire report, because they do not believe the Fed has cut its balance sheet. 1 person: “It never started.” Wrote. “The balance sheet continues to grow, there has been no reduction,” someone else replied.

Critics claim the Fed’s quantitative easing programs are fully functional

At the end of June, the gold bug and economist Peter Schiff denounce The US central bank to continue the quantitative easing process. “The Fed’s balance sheet just expanded for the third consecutive week in June,” Schiff said. A rise of $1.9 billion increased the size of the Federal Reserve’s balance sheet to $8.934 trillion. I wonder when the Fed will stop creating inflation by ending quantitative easing and really start fighting it with a QT start.”

On July 15, the author and market madman at Welt, Holger SchaebitzThe Fed, he said, “has really stopped the balance sheet contraction.” Zschaepitz added:

Total assets grew by $4 billion last week to $8.896 trillion. The federal balance sheet is now equal to 36.5% of [the] US GDP versus 81.9% for the European Central Bank and 135% for the Bank of Japan.

A Twitter account called Occupy Fed Movement spoke of the Fed’s continued QE the day before Zschaepitz’s tweet. FED BS update: The Fed increased the balance sheet by $4 billion ($3.3 billion “other assets”) in the same week that the CPI hit 9.1%. Wrote. “Treasuries are up $1.1 billion and MBS is flat despite supposed QT plans. It’s clear that the Fed is serious about fighting inflation,” the Twitter account added sarcastically.

For years now, the Federal Reserve has been accused of bailing out huge banks and creating abnormal booms and busts in the US and global economies. Since 2020, the Federal Reserve’s balance sheet is much larger than at any time in history, and it’s very difficult to understand the money supply growth since that year.

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Analysts, CPI, Critics, Economists, Federal Reserve, Federal Funds Rate, Federal Reserve, Forecasting Company, Holger Zschaepitz, Inflation, Inflation Rate, Jerome Powell, Larry Summers, LH Meyer, LH Meyer Economists, Monetary Expansion, Money Supply, Reserve Occupation Fed, Occupy Fed Movement, Peter Schiff, QE, QT, Quantitative Easing, Recession, US Central Bank, Wall Street Journal Articles

What do you think of the latest Wall Street Journal report that says the Fed can stop the shrinking of its balance sheet? What do you think of the accusations that the US central bank has not shrunk the balance sheet much at all? Tell us what you think about it in the comments section below.

Jimmy Redman

Jamie Redman is the head of news at Bitcoin.com News and a technology financial journalist based in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open source code, and decentralized applications. Since September 2015, Redman has written more than 5,700 articles for Bitcoin.com News about the disruptive protocols emerging today.




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